Federal Insurance Company v. CLE Transportation, Inc.

Background

Federal Insurance Company, acting as the subrogee of Cranston Trucking Co., sued CLE Transportation, Inc. for losses arising from CLE’s failure to deliver a trailer of confections, energy drinks, snacks, and candies from New York to California. Cranston Trucking contracted with CLE to transport the shipment, which CLE accepted on November 30, 2017. After the trailer arrived in California, CLE parked it in an unsecured location for weekend storage. When CLE returned, the cargo was gone and was never delivered.

Federal Insurance alleged that Cranston Trucking suffered a loss of $96,850.35 and that the loss was covered by its insurance policy. The complaint asserted breach of contract, breach of bailment, negligence, and a claim under the Carmack Amendment, a federal law governing carriers’ responsibility for goods lost or damaged during interstate transportation. CLE did not file an answer or otherwise appear. The Clerk entered a certificate of default on March 15, 2019, and Federal Insurance moved for default judgment.

Jurisdiction

The court examined subject-matter jurisdiction before considering default judgment. The complaint’s jurisdictional statement expressly sought damages for freight shipped in interstate commerce under the Carmack Amendment and referred elsewhere to CLE’s contractual and statutory duties. Although the complaint labeled its specific claims as state-law claims and did not separately identify a Carmack Amendment count, the court concluded that these statements gave CLE sufficient notice that Federal Insurance intended to assert a Carmack Amendment claim. The court therefore found federal-question jurisdiction under 28 U.S.C. § 1337.

The court did not rely on diversity jurisdiction. The complaint did not allege CLE’s citizenship, and an affidavit stating that CLE’s principal place of business was in California did not establish its state of incorporation, which is also relevant to a corporation’s citizenship.

Liability

The court held that the state-law claims were preempted by the Carmack Amendment, meaning that the federal law displaced state-law claims concerning an interstate carrier’s liability for lost goods. To establish a basic Carmack Amendment claim, a plaintiff must show that the goods were delivered to the carrier in good condition, arrived damaged or were not delivered, and had a specific amount of loss.

The complaint alleged that the shipment was delivered to CLE in good condition, that CLE failed entirely to deliver it to California, and that Federal Insurance paid at least $96,850.35 for Cranston Trucking’s losses. The court concluded that these allegations sufficiently established liability under the Carmack Amendment. Because CLE had defaulted, the well-pleaded factual allegations were treated as admitted, but the court still independently determined that those allegations established legal liability.

Damages and Interest

The court found that Federal Insurance proved its damages with reasonable certainty. An affidavit from Cranston Trucking officer Charlie Edgerton identified four lost shipments valued at $12,792.60, $28,002.90, $40,305.18, and $15,749.67. The affidavit included invoices and an agreement showing that Federal Insurance agreed to cover the loss in the amount of $96,850.35.

The court also awarded prejudgment interest. It selected the federal statutory rate under 28 U.S.C. § 1961 rather than the 8% rate Federal Insurance requested without citation. Interest was awarded from December 5, 2017, the date of the expected delivery and loss, through the date of judgment.

Disposition

Judge J. Paul Oetken granted Federal Insurance’s motion for entry of default judgment. The court awarded $96,850.35 in compensatory damages and prejudgment interest at the federal statutory rate from December 5, 2017, to the date of judgment. The Clerk was directed to enter judgment and close the case.