Consolidated Electrical Distributors v. Logistics

Background

Consolidated Electrical Distributors, Inc., doing business as GreenTech Renewables, filed the case in Sonoma County Superior Court against Midway Logistics, LLC, M&Z Encore Transportation, Inc., and Doe defendants. GreenTech alleged that it hired Midway to arrange transportation of 1,716 solar panels, worth approximately $609,508.80, from Indiana to California. The cargo was not delivered, some was allegedly diverted to a facility operated by M&Z, and M&Z allegedly released it to an unauthorized party.

GreenTech asserted breach-of-contract and misrepresentation claims against Midway, bailment claims against Midway and M&Z, and a claim under the federal Carmack Amendment against Midway. Midway removed the case to federal court based on federal-question and diversity jurisdiction. GreenTech moved to remand, arguing that Midway had not obtained M&Z’s consent and that neither federal-question nor diversity jurisdiction supported removal.

M&Z’s Consent to Removal

The court explained that, generally, all defendants who have been properly joined and served must join in or consent to removal. But that rule does not apply to nominal, unknown, or fraudulently joined parties. A removing defendant also must explain the absence of any co-defendants from the notice of removal and, under relevant Ninth Circuit district court authority, exercise due diligence to determine whether other defendants have been served.

The court did not decide whether merely checking the state-court docket would ordinarily establish sufficient diligence. Instead, it focused on whether GreenTech effectively served M&Z. GreenTech’s proof of service described personal service at the address listed for M&Z’s service agent, but Midway presented evidence that the address was a mailbox rental establishment and that the person served was not one of M&Z’s authorized agents listed with the California Secretary of State. GreenTech acknowledged that service might have been ineffective and argued that the issue could be addressed later.

Because the record called into question whether M&Z had provided a real authorized agent at an address where personal service could be completed, the court held that Midway would not be faulted for failing to make additional efforts to obtain M&Z’s consent. The court excused the lack of unanimity because M&Z apparently had not been properly joined and served and was effectively unknown. The court therefore denied the motion to remand insofar as it relied on the lack of M&Z’s consent.

Federal-Question Jurisdiction

The court held that GreenTech’s Carmack Amendment claim supplied federal-question jurisdiction. The court noted that federal courts have original jurisdiction over an action under the Carmack Amendment when the amount in controversy for each receipt or bill of lading exceeds $10,000. GreenTech pleaded losses exceeding $600,000, which was above that threshold.

GreenTech argued that its Carmack Amendment claim could not support federal jurisdiction because it was pleaded in the alternative and because Midway’s answer denied that Midway was a carrier liable under the amendment. The court rejected both arguments. It reasoned that GreenTech could have avoided federal jurisdiction by asserting only state-law claims, but its complaint included the federal Carmack Amendment claim. The court also stated that removability is determined from the face of the complaint, not from defenses in the answer.

Because it found federal-question jurisdiction, the court did not decide whether the state-law claims were completely preempted or whether diversity jurisdiction independently supported removal. It also did not address Midway’s argument under the separate removal provision for claims outside the court’s original or supplemental jurisdiction because Midway had not identified a nonremovable claim in its notice of removal or moved to sever one.

Disposition

Judge William Orrick denied GreenTech’s motion to remand. The order states that the case will proceed in federal court.