American Transport Group LLC v. California Cartage Co.
American Transport Group LLC v. California Cartage Co.
Opinion of the Court
MEMORANDUM OPINION AND ORDER
American Transport Group (ATG), a property broker, sued two warehousing and logistics providers, defendants California Cartage Company (CCC) and Pacorini Metals, for the loss of two shipments of copper cathodes. ATG claims that the defendants negligently handled the loads, causing them to be lost or stolen rather than released to the appropriate carrier and delivered to the intended recipient. The defendants now move for summary judgment. Among their arguments is the contention that ATG’s claim rests on facts that contradict its representations in a pri- or lawsuit pertaining to the same shipments, in which ATG obtained a default judgment against ACH Express, Inc. — the designated carrier of the goods and a stranger to these proceedings. For the reasons that follow, the defendants’ motions are granted.
FACTS
Given the nature of the issues presented, the underlying facts may be stated briefly. ATG brokered the • transportation of the two loads of copper cathodes owned by its customer, Trafigura AG, which were valued at $282,333.87.
In its August 8, 2013, complaint in this case, ATG never refers to its designated carrier, ACH, by name. It alleges simply that because of the defendants’ negligence as warehousing providers, the unnamed carrier never received the loads. Specifically ATG alleges that Pacorini and CCC released the two truckloads of copper cathodes to someone other than ATG’s designated shipper. Compl. ¶¶ 19, 23, 24, 40, ECF No. 1.
ATG’s complaint does not mention that just two weeks earlier, on July 25, 2013, ATG also had sued ACH in this Court under the Carmack Amendment, the federal law providing a remedy against interstate carriers for goods lost or damaged in transit. See ACH Compl., Case No. 13 C 5317, ECF No. 1. That complaint (the “ACH complaint”) does not mention CCC or Pacorini in any capacity. And ATG, quite possibly the only party aware of the pendency of two lawsuits related to the exact same lost shipment, did not apprise the Court, or as far as the Court knows, the defendants, of the related nature of the cases. See generally Fed. R. Civ. P. 20(a)(2) (permissive joinder of defendants);
In the ACH complaint, ATG alleged that on October 19, 2012, it tendered the two truckloads to ACH, which “acknowledged receipt of the shipment in good order and condition on the bills of lading it issued therefor” but failed to deliver the goods. ACH Compl. ¶¶ 7-10, Case No. 13 C 5317, ECF No.l. ATG claimed that ACH was liable for ATG’s “full actual loss” of $282,333.87. When ACH failed to respond to the complaint, ATG moved for a default judgment and submitted as support the affidavit of Thomas Soehlke, its Operations Manager. In the affidavit, dated November 1, 2013, Soehlke attests that the shipments were tendered to ACH and that ACH acknowledged receipt but failed to deliver the shipments, causing ATG to be damaged in the amount of $282,333.87. Soelke Affidavit A, CCC Ex. 6, ECF No. 62-6. Unaware that three months earlier, ATG had filed a separate complaint (in this case) alleging that CCC and Pacorini had failed to deliver the very same loads to ACH, this Court entered default judgment for ATG against ACH on November 12, 2013.
In this case, CCC and Pacorini moved to dismiss the claims against them on a variety of theories. ATG responded to the motions on November 12, 2013 — the same day the default judgment was entered in the ACH case. Having already obtained complete relief, ATG nevertheless continued to prosecute this case against CCC and Pacorini for the same loss. This Court (not recognizing that this lawsuit pertained to the same two lost loads) therefore ruled on the defendants’ motions, denying them both on the merits of the arguments that had been raised. The defendants subsequently answered the complaint, and at that point, each raised for the first time defense of “collateral estoppel”
The defendants now move for summary judgment, primarily arguing that the doctrine of judicial estoppel should be applied to preclude any claim by ATG inconsistent with its prior representations about what happened to the shipments.
DISCUSSION
The defendants contend that ATG is precluded from attempting to demonstrate in this case that either of them is responsible for the loss of the copper cathode shipments because ATG previously represented that the goods had been delivered to ACH, the carrier, and were subsequently lost or stolen. In assessing this defense, the court applies the federal law of judicial estoppel although its jurisdiction is based upon diversity of citizenship. Unlike res judicata or other preclusion doctrines, as to which the court is bound to apply state law governing judgments, judicial estoppel relates to the federal courts’ ability to protect themselves from manipulation and should not vary according to the law of the state in which the dispute arose. See Wells v. Coker, 707 F.3d 756, 760 (7th Cir. 2013); In re Airadigm Commc’ns, Inc., 616 F.3d 642, 661 (7th Cir. 2010); Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523, 527 (7th Cir. 1999). The purpose is to protect the integrity of the judicial process. New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001).
Simply stated, under the doctrine of judicial estoppel, “a party who prevails on one ground in a prior proceeding cannot turn around and deny that ground in a later proceeding.” Adkins v. VIM Recycling, Inc., 644 F.3d 483, 495 (7th Cir. 2011); Jarrard v. CDI Telecommunications, Inc., 408 F.3d 905, 914 (7th Cir. 2005) (explaining, “the doctrine aims to prevent a party that prevails in one lawsuit on one ground from repudiating that same ground in another lawsuit”). “The principle is that if you prevail in Suit # 1 by representing that A is true, you are stuck with A in all later litigation growing out of the same events.” Eagle Found., Inc. v. Dole, 813 F.2d 798, 810 (7th Cir. 1987).
Although there is no rigid formula, there are “at least three pertinent factors” to examine when applying the federal doctrine of judicial estoppel: (1) whether the party’s later position is “clearly inconsistent” with its earlier position; (2) whether the party against whom estoppel is asserted in a later proceeding has succeeded in persuading the court in the earlier proceeding; and (3) whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped. In re Airadigm Commc’ns, Inc., 616 F.3d at 661 (quotation marks and internal citations omitted). “Additional considerations may inform the doctrine’s application in specific factual contexts.” New
As to the first factor, ATG’s position in this case is clearly contrary to the one it took in its suit against ACH — a fact it admits.
Second, ATG prevailed in the first case. Rather than wait to see what discovery would reveal in this case, it affirmatively pursued a default judgment against ACH, submitting Soehlke’s sworn affidavit as support for that motion. Indeed, it filed its complaint alleging that CCC and Pacorini failed to deliver the shipments to ACH only two weeks after filing its complaint alleging that the shipments had been picked up by ACH but proceeded to obtain a judgment against ACH that it was entitled, and sought, to enforce. Whether ACH can pay that judgment, or whether its insurer will, is beside the point. It is true that ACH did not have to “persuade” the Court of the soundness of its position because of ACH’s default, but ATG nevertheless prevailed based on the allegations of its complaint and the first Soelke affidavit. The only possible basis for relief against ACH under the Carmack Amendment was that ACH, the ground carrier, was liable for the loss of the shipments. 49 U.S.C. § 14706; Am. Nat. Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 928 (7th Cir. 2003) (The Carmack Amendment “allows a shipper to recover from a carrier for actual loss caused by the carrier”). No judgment by default could have been obtained without ATG’s representation that ACH had taken possession of the goods. See generally Merrill Lynch Mortgage Corp. v. Narayan, 908 F.2d 246, 253 (7th Cir. 1990) (explaining that the Seventh Circuit follows the rule that the well-pleaded allegations of the complaint relating to liability are taken as true). That position is the very foundation of the judgment, by default or otherwise, and therefore the second factor for the application of judicial estoppel is satisfied.
Finally, despite ATG’s arguments to the contrary, there is no question that ATG would derive an unfair advantage if not estopped from asserting its claims against the defendants in this case. Although pleading in the alternative is permitted (see infra; Fed. R. Civ. P. 8(d)(3)), obtaining judgments against multiple defendants for the very same loss without proving any kind of joint or derivative liability is plainly inconsistent with the law. It is a double recovery. “Why should one
ATG says it should be able to change its position now because CCC deceived it by falsely asserting that it had delivered the shipments to ACH. That argument fails several times over. To begin, ATG has not proved any deceit by CCC. CCC disputes ATG’s assertions regarding the bills of lading, and ATG has nothing but Soehlke’s opinion of the appearance of the documentation CCC provided to support its contention that bills of lading were never issued. That does not answer CCC’s argument that it was the duty of the carrier, not CCC, to provide them. Moreover, Soelke’s misrepresentations to the Court in the ACH lawsuit are not CCC’s doing. He represented then that he had personal knowledge that ACH had received the loads and issued bills of lading. He now concedes that this statement was false at the time. He knew at the time that he was relying on CCC’s word, not his own knowledge, in attesting that ACH got the shipments. Therefore his misrepresentation in that respect was not induced by CCC.
More significantly, CCC’s alleged deception does not explain, much less justify, ATG’s attempt to obtain inconsistent judgments against multiple defendants. That is because ATG acknowledges that its discovery of the alleged deception by CCC “led to the ñling of the instant law suit.” PI. Mem. 3, ECF No. 70 (emphasis added). “The instant law suit” was filed only two weeks after the law suit against ACH, so it is plain that ATG continued to seek its judgment against ACH for months after it learned of the purportedly false information from CCC. Soehlke’s first affidavit, swearing that the shipments were picked up by ACH, was dated November 1, 2013, almost three months after ATG had filed its complaint against CCC and Pacorini alleging that they were not. Soelke’s second affidavit swears that it was CCC’s inability to produce bills of lading that convinced him that ACH had never picked up the shipments, and that “[h]ad ATG known when it sued ACH what it now knows” about CCC’s records, it “would have sued CCC and not ACH.” Soelke Affidavit B ¶¶ 15, 20, PL Ex 1, ECF. No. 73. But, as ATG’s brief concedes in the language quoted above, ATG discovered the problems with CCC’s records less than two weeks after it sued ACH, proceeded to sue CCC and Pacorini on that basis, and continued to pursue a judgment against ACH on a factual premise that it knew to be false.
It is clear, then, that even if CCC deceived ATG about tender of the shipments to ACH, ATG has not provided a reasonable justification for the “change” in its litigating position. See In re Airadigm Commc’ns, Inc., 616 F.3d at 663. For all its talk of being a “victim of deceit,” PI. Mem. 7, ECF No. 70, ATG was aware within two weeks of the information on which it bases its claim of deception, but the only action that information prompted it to take was to file a separate lawsuit against CCC and Pacorini that made no mention whatsoever of the ACH complaint or the possibility of liability on the part of ACH. Having concluded that CCC deceived it about tender of the shipments to ACH (ATG’s current position), ATG could not in good faith have continued to pursue a judgment against ACH. If CCC tricked ATG into suing the wrong party, as ATG maintains, that fact does not explain or justify ATG’s successful efforts to obtain a judgment against the wrong party when it knew that such a judgment had no basis in fact.
That ATG now belatedly offers to agree to have the default against ACH vacated, see PL Mem. 9, ECF No. 70, does not help its case. That offer comes only after ATG’s extensive but unsuccessful attempts to obtain payment from ACH or its insurer. Nothing stopped ATG from moving to vacate the default upon learning that its representations to the Court in that case were false. Instead, it continued to pursue relief against CCC and Pacorini while doing nothing to prevent the prospect of a double recovery. Now that ATG seems certain that it cannot collect its “worthless” judgment, it is willing to have the default vacated
ATG is also off-base in suggesting that judicial estoppel should not apply because these defendants were not parties to the prior case and the judgment “had no affect [sic] or impact upon” them. Judicial estoppel is about protecting the courts from manipulation, not protecting the interests of particular parties. Identity of the parties is not required. Judicial estoppel “may be raised by any party, regardless of whether the party was prejudiced by the inconsistency, or by the court on its own motion.” Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 795 (7th Cir. 2013). ATG can rest assured that this Court would have raised the issue sua sponte had the defendants not done so.
ATG is right about one thing: Judicial estoppel is an equitable doctrine designed to prevent unfairness and inequita
***
Accordingly, the defendants’ respective motions for summary judgment are granted on the basis of judicial estoppel. Judgment in Case No. 13 C 5650 is entered for the defendants and the case is terminated.
Furthermore, the Court orders ATG to show cause why the default judgment in the ACH case, No. 13 C 5317, should not be vacated on the Court’s own motion pursuant to Fed. R. Civ. P. 60(d)(3) for fraud upon the Court, and the case dismissed, owing to ATG’s implicit concession that its motion for a default judgment in that case had no factual basis. ATG’s response to the order to show cause is due within 21 days of this order and shall be filed on the docket in Case No. 13 C 5317.
Finally, ATG’s counsel
This Memorandum Opinion and Order is to be filed in both cases, No. 13 C 5317 and No. 13 C 5650.
. Trafigura is a trader of metals (buying, selling, storing, and shipping) and frequently does business with Pacorini through the London Metals Exchange.
. Collateral estoppel, or issue preclusion, is not the appropriate doctrine to apply in trying to bar this suit based on the prior judgment against ACH. Under Illinois law, a judgment by default cannot support the defense of collateral estoppel in a subsequent suit, because collateral estoppel requires that the relevant issue have been "actually litigated” in the prior suit. In re Jacobs, 448 B.R. 453, 470 (Bankr.N.D.Ill. 2011) ("Illinois subscribes to the majority view that a default judgment cannot form the basis for collateral estoppel”); S & S Auto. v. Checker Taxi Co., 166 Ill.App.3d 6, 10, 520 N.E.2d 929, 932, 117 Ill.Dec. 578 (1988).
. Pacorini also asserted an argument that its contract with Trafigura effectively precludes the assignment of Trafigura’s claim to ATG, but in view of the disposition of this case on the ground of judicial estoppel, the Court has not addressed that argument.
. CCC disputes that ATG never received bills of lading and further notes that the Carmack Amendment requires the carrier (here, ACH) to issue bills of lading. CCC Response, ¶¶ 4,7, ECF No. 75. CCC has produced documentation for the shipments, but according to Soelke, the documents do not look like any other bills of lading he has ever seen and therefore are not genuine. Soelke Affidavit B ¶ 19, PI. Ex. 1, ECF 73.
. That is not to say that it was improper to simultaneously allege inconsistent claims against the defendants here and in the ACH case. ''[TJhere’s no rule against inconsistent pleadings in different suits, or for that matter a single suit.” Peterson v. McGladrey & Pullen, LLP, 676 F.3d 594, 597 (7th Cir. 2012); Astor Chauffeured Limousine Co. v. Runnfeldt Inv. Corp., 910 F.2d 1540, 1548 (7th Cir. 1990) (inconsistent pleading permitted because "the pleader is limited to a single recovery no matter how many different (and conflicting) theories it offers”); see Fed. R. Civ. P. 8(d)(3). In Peterson, the Seventh Circuit blessed the pleading of two versions of the facts against different defendants. See id. (where “the Trustee [is] alleging that Bell both did, and did not, know of Peters's fraud in 2006 and 2007, the pleading is sufficient if either allegation is sufficient). Whether there was a sufficient factual basis for the allegations in one or both complaints, and whether the plaintiff was required to plead upon information and belief as to the material allegations is matter for Rule 11 rather than the rules of pleading. See Fed. R. Civ. P. 11(b)(3).
. The Court notes, however, the ATG never has, in fact, moved to vacate the default judgment in Case Number 13 C 5317 and voluntarily dismiss the case against ACH — even now, when the defendants' summary-judgment motions have placed it on clear notice that the judgment in that case jeopardizes its relief in this case.
. The Court will not impose additional sanctions on ATG itself, which already will bear a financial consequence if both of its lawsuits are dismissed.
Reference
- Full Case Name
- AMERICAN TRANSPORT GROUP LLC v. CALIFORNIA CARTAGE CO., LLC, and Pacorini Metals USA, LLC
- Cited By
- 3 cases
- Status
- Published