Certain Underwriters at Interest at Lloyd's of London v. UPS of Am., Inc.

Certain Underwriters at Interest at Lloyd's of London v. UPS of Am., Inc.

Opinion

 [*333]  CHAGARES, Circuit Judge.

This case calls upon us to construe the preemptive scope of the Carmack Amendment, 49 U.S.C. § 14706, and to clarify the judicially-created "true conversion" exception. We hold that ] the Carmack Amendment preempts all state law claims for compensation for the loss of or damage to goods shipped by a ground carrier in interstate commerce. We also conclude that the "true conversion" exception is an exception to the liability limiting features of the Carmack Amendment, not an exception to its preemptive scope. We will therefore affirm the order of the District Court.

This case is about missing packages. First State Depository, LLC ("First State") provides custody, shipping, and accounting services for coins and special metals. When it ships coins or special [**2]  metals, it often does so via a ground carrier such as the United Parcel Service of America, Inc. ("UPS"), as it did here. The plaintiffs, First State's third-party insurers (the "Underwriters") invoke their subrogation rights and allege that twenty-seven of First State's shipments were lost or stolen by UPS or its employees during an eight-week period in early 2012. UPS never located any of the missing packages, which were allegedly worth a total of $150,000.00.

The Underwriters brought state law claims against UPS in the United States District Court for the Eastern District of Pennsylvania for breach of contract, negligence, negligent supervision of employees, and "true [and] fraudulent conversion." Appendix ("App.") 307-404. In their conversion claim, they alleged that "UPS or its employees, agents, technicians, vendors, subcontractors, drivers and/or servants" deprived First State of its property and "[u]nlawfully took, carried away, concealed, stole or obtained [the shipments] by fraud or deception." App. 308. The Underwriters premised subject matter jurisdiction solely on the complete diversity of the parties; they did not bring any claims based upon federal law.

The District Court dismissed [**3]  the Underwriters' amended complaint for failure to state a claim upon which relief could be granted. It held that the Carmack Amendment preempted all of the Underwriters' state law claims. App. 11. It recognized that some courts have found "that the Carmack Amendment's liability limitations do not apply when the common carrier has committed a true conversion of  [*334]  goods," but held that this exception did not permit an action based on state law, but rather abrogated the limitation of liability for causes of action brought under the Carmack Amendment itself. App. 11-12. Because the Underwriters only brought state law claims, the District Court held that the exception did not save their complaint. Finally, the District Court noted that the Underwriters failed to plead their true and fraudulent conversion claim with the particularity demanded by Federal Rule of Civil Procedure 9(b). App. 14-15. The Underwriters timely appealed.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.