Elite Logistics Corporation v. Mol America, Inc. et al

Filing 152

ORDER DENYING PLAINTIFFS MOTION FOR CLASS CERTIFICATION 119 by Judge Dean D. Pregerson . (lc). Modified on 2/2/2016 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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ELITE LOGISTICS CORPORATION
and on behalf of all others
similarly situated,

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Plaintiff,

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v.

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MOL AMERICA, INC.,

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Defendants.
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Case No. CV 11-02952 DDP (PLAx)

ORDER DENYING PLAINTIFFS’ MOTION
FOR CLASS CERTIFICATION
[Dkt. No. 119]

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Presently before the court is Plaintiffs’ Motion for Class

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Certification.

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and heard oral argument, the court denies the motion and adopts the

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following order.

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I.

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Having considered the submissions of the parties

Background
As described in this court’s earlier orders, Defendant MOL

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(America) Inc. (“MOL”) is an international ocean carrier, and

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transports cargo in shipping containers MOL owns.

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motor carriers, or truckers, such as Plaintiffs, transport MOL’s

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cargo containers from ports to inland distribution centers, then

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return the empty containers to MOL at the port.

Independent

MOL contracts with

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the cargo owners, not with the truckers, for the overland

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transport.

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The cargo owners, in turn, hire and pay the truckers.

MOL’s contracts with cargo owners provide for some period of

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“free time,” during which MOL does not charge customers for the use

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of its shipping containers.

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expiration of the “free time” period, MOL assesses a “detention

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charge.”

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out, or borrow, the shipping containers containing the cargo

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owners’ property at no charge for a certain time period.

When containers are returned after the

In other words, MOL allows its cargo customers to check

Ideally,

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the container can be delivered to the cargo owner, unloaded, and

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then returned to MOL within the “free time” period.

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container is returned late, however, MOL charges a late return

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fee.1

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If the

Although cargo owners contract with MOL to transport

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containers to the inland container yard, the independent truckers

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actually pick up, transport, and return MOL’s containers.

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truckers are not, however, parties to the transportation service

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contract between MOL and the cargo owners.

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truckers are late returning MOL’s containers, MOL charges late fees

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to the truckers, not to the contracting cargo owners.

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The truckers pay the late fees, then in turn bill cargo owners for

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those fees.

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trucker may be denied access to shipping containers, essentially

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foreclosing the trucker from doing business.

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The

Nevertheless, when

If a trucker refuses to pay late fees to MOL, the

In 2005, California enacted Business and Professions Code §
2298, which states:

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The parties refer to this late fee either as a “detention
charge” or “per diem.”
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(b) An intermodal marine equipment provider or
intermodal marine terminal operator shall not impose per
diem, detention, or demurrage charges on an intermodal
motor carrier relative to transactions involving cargo
shipped by intermodal transport under any of the following
circumstances:
(1) When the intermodal marine or terminal truck
gate is closed during posted normal working hours. No per
diem, detention, or demurrage charges shall be imposed on
a weekend or holiday, or during a labor disruption period,
or during any other period involving an act of God or any
other planned or unplanned action that closes the truck
gate.

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Cal. Bus. & Profs. Code § 2298.

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Plaintiffs allege, on behalf of a putative class, that MOL

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violated California Business and Professions Code § 2298 and

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breached a contract by charging late fees on weekends and holidays.

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Plaintiffs now move to certify a Rule 23(b)(3) damages class

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comprised of all intermodal motor carriers who were charged and

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paid per diem and demurrage detention charges in California for

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weekend days and holidays when the ports were closed from April 7,

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2007 to the present.

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II.

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Legal Standard
The party seeking class certification bears the burden of

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showing that each of the four requirements of Rule 23(a) and at

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least one of the requirements of Rule 23(b) are met.

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Dataprods. Corp., 976 F.2d 497, 508-09 (9th Cir. 1992).

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defines different types of classes.

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716 F.3d 510, 512 (9th Cir. 2012).

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“questions of law or fact common to class members predominate over

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individual questions . . ., and that a class action is superior to

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other available methods for fairly and efficiently adjudicating the

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controversy.”

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prerequisites for class certification:

See Hanon v.
Rule 23(b)

Leyva v. Medline Indus. Inc.,
Rule 23(b)(3) requires that

Fed. R. Civ. P. 23(b). Rule 23(a) sets forth four

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(1) the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact
common to the class, (3) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class, and (4) the representative parties
will fairly and adequately protect the interests of the
class.

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Fed. R. Civ. P. 23(a); see also Hanon, 976 F.2d at 508.

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These four requirements are often referred to as numerosity,

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commonality, typicality, and adequacy.

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Falcon, 457 U.S. 147, 156 (1982).

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See Gen. Tel. Co. v.

In determining the propriety of a class action, the

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question is not whether the plaintiff has stated a cause of

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action or will prevail on the merits, but rather whether the

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requirements of Rule 23 are met.

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Jacquelin, 417 U.S. 156, 178 (1974).

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considers the merits of the underlying claim to the extent

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that the merits overlap with the Rule 23(a) requirements, but

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will not conduct a “mini-trial” or determine at this stage

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whether Plaintiffs could actually prevail.

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Wholesale Corp., 657 F.3d 970, 981, 983 n.8 (9th Cir. 2011).

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Nevertheless, the court must conduct a “rigorous analysis” of

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the Rule 23 factors.

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claims are “intimately involved” with many class

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certification questions, the court’s rigorous Rule 23

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analysis must overlap with merits issues to some extent.

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Id., citing Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541,

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2551 (2011).

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III. Discussion

Id. at 980.

Eisen v. Carlisle &
This court, therefore,

Ellis v. Costco

Because the merits of the

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The central issue presented by MOL’s Opposition is the

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applicability of a “pass-on” defense to Plaintiffs’, and in
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particular, Elite’s, claims.

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eliminate liability by proving that a plaintiff has passed on

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an overcharge to a subsequent purchaser, and therefore

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suffered no injury.

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4th 758, 766 (2010).

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present serious typicality, adequacy, and predominance

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problems, and preclude certification of the proposed damages

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class under Rule 23(b)(3).

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A pass-on defense seeks to

See Clayworth v. Pfizer, Inc., 49 Cal.
Such a defense, if viable, would

As explained above, MOL enters into service contracts

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with cargo owners, but charges late fees to independent

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truckers, such as Elite.

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of being barred from MOL’s marine terminal and shut out of

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the intermodal transportation market.

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and apparently does, seek and obtain payment from cargo

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owners for the late fees assessed by MOL.

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Elite must pay those fees at pain

However, Elite can,

As pertinent here, in late 2007, Elite’s president and

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owner, Moon Chul Kang, contested the amount of late fees MOL

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charged Elite for a shipment to LG Electronics, and sought a

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discount.2

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payment of 60% of the assessed late fees.

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then invoiced and received from LG approximately 170% of the

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amount Elite paid to MOL.

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fees to MOL, including some improperly assessed late fees,

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Elite was not only reimbursed for those expenses, but

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ultimately appears to have profited from the exchange.

MOL acceded to the request and accepted Elite’s
Elite, however,

Thus, although Elite did pay late

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Elite’s representations regarding the reasons for the
discount form the basis of MOL’s Counterclaim.
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MOL contends that, because Elite obtained a windfall

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from the LG late fee transactions, Elite cannot show that it

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suffered any damages.

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amount of money it received from LG is irrelevant because the

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“pass-on defense is unavailable for determining standing or

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damages.”

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Elite, for its part, argues that the

(Opp. at 14.)

As this court has previously noted, the California

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Supreme Court has limited the use of a pass-on defense as a

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barrier to standing in suits under state antitrust law.

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Clayworth, 49 Cal. 4th at 789 (“That a party may ultimately

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be unable to prove a right to damages . . . does not

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demonstrate that it lacks standing to argue for its

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entitlement to them. . . . [M]itigation, while it might

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diminish a party’s recovery, does not diminish the party’s

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interest in proving it is entitled to recovery.”).

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California Supreme Court extended that principle to a

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consumer suit under California’s Unfair Competition Law in

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Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 334 (2011).

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The

Elite, citing Clayworth and Kwikset, asserts that the

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pass-on defense “is not viable as a matter of law” with

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respect to either standing or damages.

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Neither case, however, stands for such a broad proposition.

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As an initial matter, neither case addressed class

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certification issues, and both limited discussion of the

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pass-on defense to questions of standing.

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court is not persuaded by Elite’s suggestion that the Kwikset

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court imposed a general bar on pass-on defenses, or even a

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bar in all UCL cases.

(Opp. at 14.)

Further, this

Rather, the court disapproved of the
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defense in the context of a consumer claim for false

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advertising.

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the veracity of a lockmaker’s claim that its products were

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made in the United States.

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that context, the pass-on defense was premised on the fact

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that the locks, regardless of their actual country of origin,

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were functional and could be re-sold.

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Kwikset court rejected that reasoning, however, because it

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ignored consumers’ material valuation of intangibles, such as

In Kwikset, a consumer brought suit challenging

Kwikset, 51 Cal. 4th at 316.

Id. at 333-336.

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resulting from purchases based on misrepresentations,

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including transactional costs associated with resale.

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The

American manufacture, and the resulting economic harm

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In

329, 333-334.

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Id. at

The court is not persuaded, however, that the Kwikset

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court’s logic is applicable here, outside the consumer arena,

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in a case involving a clear-cut statutory violation, and in

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the context of class certification to a question of damages

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rather than standing.

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was charged illegal late fees.

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defense bar is premised on the difficulty of apportioning

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ostensibly resultant damages, such as “the negative

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competitive effects of charging greater amounts to its

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customers.”

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that Elite charged “greater amounts” to its customers not

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merely because Elite itself incurred greater costs, but

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because Elite wanted to profit by playing LG off against MOL.

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Insofar as advancement of the UCL’s goals underpins

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proscriptions of the pass-on defense, application of such a

Granted, Elite suffered harm when it
Its argument for a pass-on

But that policy argument is vitiated by the fact

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bar under the circumstances here might do more harm than

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good.

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because cargo owners are not charged late fees and therefore

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do not have standing, no party can possibly recover for

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illegally charged late fees absent imposition of the bar.

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Only those parties who were made whole, or who, like Elite,

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actually profited from the imposition of fees, will face such

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an obstacle.

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Nor is the court persuaded by Elite’s contention that,

In any event, regardless of the general availability of

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pass-on defenses, the above discussion makes clear that the

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particularities of Elite’s interactions with MOL and with

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cargo customers render Elite’s claims, and the defenses to

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them, atypical of those of the class.

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should not be granted if there is a danger that defenses

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unique to the putative class representative will become a

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focus of the litigation.

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the very least, questions regarding Elite’s unclean hands

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would prove a distraction.

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satisfy the requirements of Rule 23.

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IV.

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Class certification

Hanon, 976 F.3d at 508.

Here, at

Accordingly, Elite has failed to

CONCLUSION
For the reasons stated above, Plaintiff’s Motion for

Class Certification is DENIED.

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IT IS SO ORDERED.

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Dated: February 2, 2016
DEAN D. PREGERSON
United States District Judge

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