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Maryland Federal District Court Dismisses Cross-Claim Against Defendant in Action Arising Under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706

AIG Europe LTD v. General System, Inc
United States District Court for the District of Maryland, Civil Action No. RDB-13-0216 (D. Md. March 19, 2015)

by Jhanelle A. Graham, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/FINAL%20Mem.%20Op.%20&%20Order%20Mot%20Dismiss%20Cross-Claim%20-%20AIG%20v.pdf

In AIG Europe LTD v. General System, Inc, et al., the United States District Court for the District of Maryland was asked to decide an action by Plaintiff, AIG Europe Ltd. (“AIG Europe”) against Defendant, General System, Inc. (“General System”), arising under the Carmack Amendment to the Interstate Commerce Act (“Carmack Amendment”), 49 U.S.C. § 14706 due to General System’s alleged loss of a tractor trailer filled with pharmaceuticals. Before the district court was TBB Global Logistics, Inc.’s (“TBB Global”) Motion to Dismiss Defendant General System, Inc.’s Cross-Claim. After reviewing the facts of the case, the district court granted TBB Global’s motion and dismissed TBB Global from the action.

TBB Global was a transportation brokerage service that arranged for General System to transport shipments for TBB Global’s clients. General System obtained insurance for its cargo, with a limit of $100,000.00 per occurrence. According to General System, TBB Global “agreed” to refrain from arranging transportation of any shipment exceeding that insurance coverage. On October 11, 2011, TBB Global directed General System to pick up a shipment of pharmaceuticals from Actavis Elizabeth, LLC (“Actavis”) and deliver it to the United Postal Service (“UPS”) in Louisville, Kentucky. TBB Global did not inform General System that the value of the shipment exceeded the $100,000 limit of General System’s insurance coverage or that the shipment contained controlled substances. A driver for General System picked up the shipment that same day, but stopped at a truck stop en route to purchase cigarettes around 11:00 p.m. When the driver exited the store, both the truck and trailer were gone. The truck was eventually located, but the goods had been removed from the trailer and were not recovered. Actavis made a claim against its insurance carrier—i.e., AIG Europe—for the loss of the goods, and one (1) of the terms for payment of the claim was that Actavis subrogate its rights to AIG Europe.

The parties made three (3) attempts to assert claims against TBB Global in the Maryland district court. On the third attempt, General System attempted to bring a cross-claim against TBB Global for breach of contract. Specifically, after AIG Europe filed the action in the district court on January 22, 2013 against General System, General System sought to file a third party complaint against TBB Global, National Insurance Agency, Inc. (“National”), and Marine MGA, Inc. (“Marine MGA”) asserting breach of contract and negligence claims. On June 26, 2013, the district court granted General System’s motion, and General System filed a Third Party Complaint against TBB Global and the other third-party defendants that same day. Subsequently, TBB Global moved to dismiss the Third Party Complaint for failure to state a claim and improper venue, which was granted by the court and TBB Global was dismissed from that action.

Subsequently, Plaintiff AIG Europe filed an Amended Complaint naming TBB Global as a defendant to AIG Europe’s original action. In response, TBB Global filed a motion to dismiss AIG Europe’s claim against it. Thereafter, General System filed a cross-claim against TBB Global, arguing that the district court could claim supplemental jurisdiction over its cross-claim against TBB Global despite the court’s previous order to dismiss AIG Europe’s claim against TBB Global.

As a preliminary matter, the Maryland district court opined that when the legal sufficiency of a complaint is challenged under a Rule 12(b)(6) motion, the court must accept as true all the factual allegations contained in the complaint, but legal conclusions drawn from those facts are not afforded such deference. Ashcroft v. Iqbal, 556U.S. 662, 678 (2009) (stating that “[t]hread bare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to plead a claim.”). Additionally, Rule 13(g) permits a litigant to file cross-claims against co-parties “if the claim arises out of the same transaction or occurrence that is the subject matter of the original action.” FED. R. CIV. P. 13(g). The court noted that cross-claims are not compulsory, and the court retains discretionary power over their assertion in any particular action. See Arguetta v. McGill Airflow, LLC, Civ. A. No. JKB-11-1102, 2012 WL 34049, at *2 (Jan. 4, 2012) (“The decision whether to allow a cross claim that meets the test of subdivision (g) is a matter of judicial discretion.”).

General System’s cross-claim was based on Federal Rule of Civil Procedure 13(g). In its Response brief, General System acknowledged that its cross-claim was proper if, and only if, the district court found that AIG alleged a viable cause of action against TBB Global. Because the court declined to exercise jurisdiction, under Federal Rule of Civil Procedure 14, over AIG’s cause of action against TBB Global and dismissed the claim, the court stated that TBB Global was no longer a “co-party” to Defendant General System. Thus, as General System conceded, it would be inappropriate for it to maintain its cross-claim under these circumstances.

Additionally, several other considerations weighed in favor of the court’s dismissal of General System’s cross-claim. For example, the court stated that due to the parties’ procedural wrangling, the case was stalled in the preliminary pleading stage for quite some time and inclusion of TBB Global in the litigation would only further delay the case. Additionally, General System’s cross-claim would require the district court to address disputes of fact and complicated issues of Pennsylvania law regarding contract formation and integration, which were totally separate from whether General System was strictly liable to AIG Europe pursuant to the Carmack Amendment—the main issue raised by AIG Europe’s Complaint.

For these reasons, the Maryland federal district court held that consideration of General System’s cross-claim was inappropriate, and dismissed the cross-claim without prejudice.


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