Sun Coast Merchandise Corp. v. Hecny Transportation, Inc.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo? = JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

Present: The Honorable CHRISTINA A. SNYDER

Catherine Jeang Laura Elias N/A

Deputy Clerk Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Attorneys Present for Defendants:

Steven Shapiro Dennis Cammarano

Attorneys Present for Third-Party Defendants:

Michael Cutler

Proceedings: MOTION OF PLAINTIFF SUN COAST MERCHANDISE CORP.

TO REMAND ACTION BACK TO STATE COURT (Dkt. 27, filed

on January 20, 2021)

I. INTRODUCTION

On October 13, 2020, plaintiff Sun Coast Merchandise Corp. (“Sun Coast’) filed

this action in the Los Angeles County Superior Court against defendants Hecny

Transportation, Inc. (“Hecny”) and Does 1 through 100, alleging: (1) breach of contract

(implied-in-fact), (2) negligence, (3) common carrier liability pursuant to Cal. Civ. Code

§ 2194, (4) implied contractual indemnity, (5) unjust enrichment, and (6) negligent

interference with prospective economic relations. See Dkt. 1-1 (“Compl.”). Sun Coast’s

claims arise from Hecny’s alleged failure to transport several thousand KN-95 masks from

Shanghai, China to Stockton, California for Sun Coast.

On December 3, 2020, Hecny removed this action under 28 U.S.C. § 1331, on the

basis that Sun Coast’s claims arise under a United States treaty: the Convention for the

Unification of Certain Rules for International Carriage by Air. Dkt. 1 (“Not. of Removal”)

| 4; see Convention for Int’] Carriage by Air, S. Treaty Doc. No. 106-45 (May 28, 1999)

(“Montreal Convention” or “Convention”). (Removal was timely, as Hecny was served on

November 3, 2020. Not. of Removal {ff 2-3.)

Hecny answered the complaint on December 9, 2020. Dkt. 9. That same day, Hecny

also filed a third-party complaint, pursuant to Rule 14(a) of the Federal Rules of Civil

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

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Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

Procedure, against United Airlines, Inc., ADS Logistics, Inc., Unis Transportation, LLC,

and Roes 1 through 20. Dkt. 11 (“Third-Party Compl.”). Hecny alleged claims for

indemnity and declaratory judgment. Id. 10-17.

Sun Coast moved to remand the case to the Superior Court on January 20, 2021, on

the ground that the Montreal Convention does not confer jurisdiction over the state law

claims at issue. Dkt. 27 (“Mot.”). Hecny opposed on February 1, 2021, dkt. 30 (“Opp.”),

and Sun Coast replied on February 8, 2021, dkt. 34 (“Reply”).

Having carefully considered the parties’ arguments and submissions, the Court

orders as follows.

I. BACKGROUND

In early 2020, Sun Coast agreed to sell and deliver 10,000 cases of KN-95 masks to

the State of California for the State’s efforts to combat COVID-19. Compl. □□ 1,23. Each

case contained 1,000 individual masks. Id. 4 1. The State agreed to pay $2.60 per mask.

Id. 35.

Sun Coast sourced 9,000 of the masks from Shanghai, China. Id. § 2. (The

complaint does not state from where the remaining 1,000 cases were sourced.) In order to

ship the masks from Shanghai to California, Sun Coast entered into a contract with Hecny

in April 2020. Id. Pursuant to the air waybill, Hecny agreed to carry, import, and deliver

the masks from Shanghai, where the masks were consigned to Hecny as an intermediary,

to the delivery location in Stockton, California no later than the last day of May 2020. Id.

2, 22.

On an unspecified date, Hecny carried the masks by air from Shanghai to San

Francisco, California. Id. ] 27. Sun Coast alleges that, according to Hecny’s records, all

9.000 cases of masks were carried to the United States, cleared customs and were stored in

the Swissport Cargo Services (“Swissport”) warehouse. Id. 4 31; dkt. 30-1, Declaration of

Carlos Tseng (“Tseng Decl.”) 5. Swissport is the cargo ground handler for United

Airlines at San Francisco International Airport, and the Swissport warehouse is located on

the premises of the airport. Dkt. 30-2, Declaration of Mark Locey (“Locey Decl.”) { 3.

Hecny then provided motor carriage of the masks to their point of delivery in Stockton.

Compl. § 27. However, Hecny only delivered 8,640 of the 9,000 cases of masks. Id. § 27.

Hecny admits that it lost 360 cases of masks, id. § 34, which Sun Coast values at $936,000,

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo? = JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

id. § 35. Sun Coast further alleges that, since its failure to deliver all 10,000 cases of masks

to the State of California, the State has not made any additional purchases of masks from

Sun Coast, despite extensive purchases of masks from Sun Coast’s competitors. Id. § 37.

Sun Coast filed suit against Hecny to recover these losses, and Hecny removed the

case to this Court. Sun Coast now moves to remand the case to the Superior Court in Los

Angeles County.

Il. LEGAL STANDARD

A motion for remand is the proper procedure for challenging removal. Remand may

be ordered either for lack of subject matter jurisdiction or for any defect in removal

procedure. See 28 U.S.C. § 1447(c). The Court strictly construes the removal statutes

against removal jurisdiction, and jurisdiction must be rejected if there is any doubt as to

the right of removal. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party

seeking removal bears the burden of establishing federal jurisdiction. See Prize Frize, Inc.

v. Matrix, Inc., 167 F.3d 1261, 1265 (9th Cir. 1999). The defendant also has the burden of

showing that it has complied with the procedural requirements for removal. Virginia A.

Phillips, J. & Karen L. Stevenson, J., Rutter Group Prac. Guide Fed. Civ. Pro. Before Trial

§ 2:3741 (The Rutter Group 2020).

Under 28 U.S.C. § 1446(b), the defendant must file the notice of removal within 30

days after being served with a complaint alleging a basis for removal. When there are

multiple defendants, all defendants named in the complaint and who have been properly

joined and served in the action must also join in the removal. Hewitt v_ City of Stanton,

798 F.2d 1230, 1232 (9th Cir. 1986). This is known as the rule of unanimity. See Chicago,

Rock Island & Pac. Ry. v. Martin, 178 U.S. 245 (1900).

If the defendant’s removal notice fails to meet the procedural requirements of

§ 1446(b), the court may remand the action based on the plaintiff's timely motion.

McAnally Enters.. Inc. v. McAnally, 107 F. Supp. 2d 1223, 1226 (C.D. Cal. 2000).

Pursuant to 28 U.S.C. § 1447(c), a motion to remand based on any defect other than subject

matter jurisdiction must be made within 30 days after the filing of the notice of removal.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

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Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

IV. DISCUSSION

Hecny argues that removal is proper because “this Court has original jurisdiction

under 28 U.S.C. § 1331,” federal question jurisdiction. Not. of Removal § 3. Hecny

elaborates that “this action arises under a treaty of the United States,” namely, the Montreal

Convention, which governs, among other things, the international shipment of goods by

air. Id.

Sun Coast responds that (1) the Montreal Convention does not apply in this instance

because the masks were lost during ground transport; (2) the Montreal Convention also

does not apply because Hecny acted as a “freight forwarder,” not an “air carrier”; and (3)

even if the Montreal Convention does apply, it does not confer federal question jurisdiction

because it does not completely preempt Sun Coast’s state law claims. Mot. at 3-4; Reply

at 2. Because the Court finds the question of complete preemption dispositive, it addresses

it first.

A. The Montreal Convention

The Montreal Convention is an international treaty governing all liability arising

from “international carriage of persons, baggage or cargo performed by aircraft.” Montreal

Convention, art. 1. The Convention was adopted in May 1999, and it went into effect in

the United States is 2003. Ehrlich v. Am. Airlines, Inc., 360 F.3d 366, 371-72 (2d Cir.

2004). “The Montreal Convention ‘was the product of a United Nations effort to reform

the Warsaw Convention so as to harmonize the hodgepodge of supplementary amendments

and intercarrier agreements of which the Warsaw Convention system of liability consists.””

Nankin v. Cont’] Airlines, Inc., No. CV 09-07851-MMM-RZx, 2010 WL 342632, at *3

(C.D. Cal. Jan. 29, 2010) (quoting Sompo Japan Insurance, Inc. v. Nippon Cargo Airlines

Co., Ltd., 522 F.3d 776, 780 (7th Cir. 2008)).

Relevant here, the Montreal Convention applies to the loss of cargo. Montreal

Convention, art. 18. Specifically, Article 18 of the Convention states that the Convention

applies to “damage sustained in the event of the destruction or loss of, or damage to, cargo

upon condition only that the event which caused the damage so sustained took place during

the carriage by air.” Montreal Convention, art. 18(1).

Finally, there is no question that the Montreal Convention preempts certain state law

causes of action in cases arising out of international carriage. See El Al Israel Airlines.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo? = JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

Ltd. v. Tseng, 525 U.S. 155, 169 (1999) (interpreting predecessor Warsaw Convention

Treaty). The Court, though, is faced with the question of whether the Montreal Convention

completely preempts state law causes of action.

B. Complete Preemption

Hecny argues the Montreal Convention completely preempts Sun Coast’s state law

claims, and thus that Sun Coast’s claims arise under the Convention. Opp. at 6. Federal

question jurisdiction requires that a case arise “under the Constitution, laws, or treaties of

the United States.” 28 U.S.C. § 1331. “The 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 (1987). The

plaintiff is the “master of the complaint” and “may avoid federal jurisdiction by exclusive

reliance on state law.” Id. Additionally, “removal to federal court cannot be based on a

federal ‘defense, including the defense of pre-emption.’” Silverstein v. Delta Airlines Inc.,

No. 2:11-CV-00236-JHN-JCx, 2011 WL 13218046, at *2 (C.D. Cal. Apr. 7, 2011)

(quoting Caterpillar, 480 U.S. at 392).

“The doctrine of ‘complete preemption’ serves as a narrow exception to the well-

pleaded complaint rule.” Id., at *2 (citing Balcorta v. Twentieth Century-Fox Film Corp.,

208 F.3d 1102, 1107 (9th Cir. 2000)). Complete preemption exists where the “preemptive

force of [a] statute[] is so strong that [it] ‘completely preempt|s]’ an area of state law.”

Balcorta, 208 F.3d at 1107 (citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65

(1987)). “In such instances, any claim purportedly based on that preempted state law is

considered, from its inception, a federal claim, and therefore arises under federal law.” Id.

(citing Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern

463 US. 1, 24 (1983)).

The complete preemption exception to the well-pleaded complaint rule is very

narrow. See Holman v. Laulo-Rowe Agency, 994 F.2d 666, 668 (9th Cir. 1993) (“The

[complete preemption] doctrine ... is a narrow exception to the ‘well-pleaded complaint

rule.’”). In fact, “only three areas have been deemed areas of complete preemption by the

United States Supreme Court: (1) claims under the Labor Management Relations Act, (2)

claims under the Employment Retirement and Insurance Security Act (ERISA), and (3)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

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Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

certain Indian land grant rights.” Zatta v. Societe Air France, No. SA CV 11-0647 DOC,

2011 WL 2472280, at *2 (C.D. Cal. Jun. 21, 2011) (quotation omitted).

Complete preemption is distinct from federal preemption, which regards whether a

plaintiff's state law claim may proceed. Dizon v. Asiana Airlines, Inc., 240 F. Supp. 3d

1036, 1046 (C.D. Cal. 2017) (“[C]omplete preemption—i.e., whether a plaintiff must bring

a claim under the Montreal Convention in federal court—{is] a different issue than federal

preemption—i.e., whether a plaintiff's state law cause of action may proceed when his

Montreal Convention claim fails.”). Put another way, “[t]he fact that individual claims

may be preempted does not mean the entire field is preempted, and the defense of claim

preemption does not convert a complaint brought under state law into one ‘arising under’

federal law.” Oganesyan v. Am. Airlines Cargo, No. CV 13-6190 SVW, 2013 WL

6229173, at *2 (C.D. Cal. Nov. 26, 2013).

There is no dispute that the Montreal Convention “controls the remedies available

and liabilities that can be imposed via [state] causes of action.” Nankin, 2010 WL 342632,

at *6. However, the question of whether the Montreal Convention completely preempts

state law claims has not been answered by the Supreme Court or the Ninth Circuit, and

lower courts are split on the issue. See Meirer v. Scandinavian Airlines Sys., No. 20-CV-

05762-JSW, 2021 WL 148240, at *3 (N.D. Cal. Jan. 15, 2021) (“[T]he Ninth Circuit has

not yet addressed whether the Montreal Convention completely preempts state law

claims.”); Jensen v. Virgin Atl, No. 12-CV-06227 YGR, 2013 WL 1207962, at *3 (N_D.

Cal. Mar. 25, 2013) (collecting cases).

Nevertheless, the majority of federal courts in California that have addressed the

issue have found that the Montreal Convention does not completely preempt state law

claims, and thus that it does not confer federal subject matter jurisdiction over a complaint

alleging only state law claims. See Mozingo v. Japan Airlines Co., 432 F. Supp. 3d 1194,

1200 (S.D. Cal. 2020) (“[T]he majority approach ... holds that the Montreal Convention

does not provide a basis for removal under the doctrine of complete preemption.”

(quotation omitted)); Oganesyan, 2013 WL 6229173, at *3 (“[T]he exclusivity provisions

of the Montreal Convention operate as an affirmative defense but do not completely

preempt state law causes of action.” (quotation omitted)): Jensen, 2013 WL 1207962, at

*4 (“[T]he exclusivity provisions of the Montreal Convention operate as an affirmative

defense but do not completely preempt state law causes of action.”); Zatta, 2011 WL

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘Oo’ JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

2472280, at *3 (remanding and noting that, “[i]n this District, two courts have recently held

that plaintiffs’ state-law claims were not completely preempted by the Warsaw or Montreal

Conventions”); Silverstein, 2011 WL 13218046, at *3 (“The provisions of the Montreal

Convention only serve to control remedies available and liabilities that can be imposed

through the state law causes of action.”’); Nankin, 2010 WL 342632, at *8 (“The court is

not persuaded that state law claims such as plaintiffs’ are preempted by the Montreal

Convention.”); Nelson v. Alaska Airlines, Inc., No. C 08-03560 JSW, 2008 WL 11396806,

at *4 (N.D. Cal. Oct. 15, 2008) (“The Court [] holds that the Montreal Convention does not

completely preempt Plaintiffs state-law claims.”); Serrano v. American Airlines, Inc.,

2008 WL 2117239, at *7 (C.D. Cal. May 15, 2008) (“[The] Montreal Convention does not

completely preempt claims such as Plaintiffs’ from being litigated in state court.”); see also

Greig v. U.S. Airways Inc., 28 F. Supp. 3d 973, 977 (D. Anz. 2014) (“[F]ind[ing]

persuasive the numerous district court opinions from within the Ninth Circuit that have

concluded that the Montreal Convention does not completely preempt state law claims but

... may be an affirmative defense.”).

In fact, this Court is aware of only one federal court in California to find that the

Montreal Convention does completely preempt state court claims. See Fadhliah v. Societe

Air France, 987 F. Supp. 2d 1057, 1064 (C.D. Cal. 2013) (Wright, J.) (finding “the

Montreal Convention does provide the exclusive cause of action against Air France and

that the Court thus has federal-question jurisdiction under the complete-preemption

doctrine”); David v. United Airlines, Inc., No. 2:15-CV-02262 ODW (PJWx), 2016 WL

1573423, at *4 (C_D. Cal. Apr. 18, 2016) (Wright, J.) (same); see also Anaya v. City of

Los Angeles, No. CV 19-8594 PSG (PLAx), 2019 WL 8750359, at *2 (C.D. Cal. Nov. 1,

2019) (reserving judgment on the issue while acknowledging that “the majority position

nationwide appears to be that the treaty does not completely preempt state law claims”

(citation omitted)).

In the absence of binding authority from the Ninth Circuit, the Court follows the

approach adopted by a majority of federal courts in this State and concludes that the

Montreal Convention does not completely preempt Sun Coast’s state law claims. Thus,

because Sun Coast alleges only state law claims, and because Hecny has not established

that the Montreal Convention completely preempts state law, the Court finds that Hecny

has failed to establish that federal question jurisdiction exists. See Jensen, 2013 WL

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo? = JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

1207962, at *3 (remanding where plaintiff's complaint alleged only state law causes of

action); Silverstein, 2011 WL 13218046, at *4 (same).

Hecny cites to several cases which it argues establish that the Montreal Convention

“preempts all state and federal law to the contrary,” and thus that it preempts the state law

causes of action at issue here. Not. of Removal 10. However, it appears Hecny conflates

two issues: federal preemption and complete preemption. Hecny is correct that the

Montreal Convention preempts conflicting state law. But, as discussed above, this is not

the same as complete preemption, which confers federal question jurisdiction over a

complaint that only alleges state law causes of action. As such, several of the cases which

Hecny cites are inapposite to the question presented here, which is whether this Court

enjoys jurisdiction over the complaint. See Doe v. Etihad Airways, P.J.S.C., 870 F.3d 406,

412 (6th Cir. 2017) (noting that, “[a]s with the Montreal Convention, the Warsaw

Convention provided international air passengers’ exclusive remedy for claims governed

by that treaty,” but not addressing complete preemption); Kruger v. United Air Lines, Inc.,

481 F. Supp. 2d 1005, 1008 (N.D. Cal. 2007) (same). Finally, while the court in Fadhliah,

987 F. Supp. 2d 1057, cited by Hecny, did find that the Montreal Convention completely

preempts state law, as discussed above, the Fadhliah court represents the minority position,

which this Court declines to adopt.

Accordingly, the Court finds that there is no subject matter jurisdiction over the

claims at issue. Because the Court finds it lacks jurisdiction to hear the case, it does not

reach Sun Coast’s remaining arguments regarding the applicability of the Montreal

Convention to the claims at issue here.'

‘Tn any event, it appears these arguments are flawed. First, Sun Coast’s argument

that the Montreal Convention does not apply to cases where cargo is lost during carriage

by land, as it argues is the case here, Mot. at 4, likely fails because, “[uJnlike the prior

language used in Article 18 of the Warsaw Convention, the Montreal Convention does not

limit the scope of coverage of [Article 18,] paragraph 3 to the period during which the

carrier is in possession of the cargo at an airport or on board an aircraft,” AIG Prop. & Cas..,

Co. v. Fed. Express Corp., No. 15-CV-6316 (KBF), 2016 WL 305053, at *6 (S.D.N_Y. Jan.

25, 2016). “The Explanatory Note to paragraph 3 (which expounds on the reasons for the

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo? = JS-6

Case No. 2:20-CV-11007-CAS-JPRx Date February 22, 2021

Title SUN COAST MERCHANDISE CORP. v. HECNY TRANSPORTATION,

INC.

V. CONCLUSION

In accordance with the foregoing, the Court GRANTS plaintiff's motion to remand,

and REMANDS the case to the Los Angeles Superior Court.

IT IS SO ORDERED.

00 05

Initials of Preparer CMJ

changes adopted from the Warsaw Convention), shows that Article 18 is intended to cover

damage to cargo ‘whenever and wherever the cargo is 1n the possession custody or charge

of the carrier.’” Id., at *6 (quoting Montreal Convention Explanatory Note, Ch. III, art.

18(3)); see Danner v. Int'l Freight Sys. of Wash.. LLC, No. CIV A RDB-09-3139, 2010

WL 3294678, at *4 (D. Md. Aug. 20, 2010) (“When an air waybill provides for door-to-

door delivery from a foreign country to a recipient’s premises in the United States, the

period of carriage by air generally lasts until the recipient receives the goods.”’).

Furthermore, Sun Coast’s argument that the Montreal Convention does not apply

because the complaint alleged Hecny acted as a “freight forwarder,” not an “air carrier,”

Mot. at 4, is also likely unavailing because, as the consignee of the masks, Hecny was the

“contracting carrier,’ while United Airlines, apparently, was the “actual carrier,” see

Chubb Ins. Co. of Europe S.A. v. Menlo Worldwide Forwarding, Inc., 634 F.3d 1023, 1026

(9th Cir. 2011) (characterizing consignee as “contracting carrier”). Article 40 of the

Montreal Convention establishes that a contracting carrier is subject to the Convention.