Starbucks Corporation v. Amcor Packaging Distribution, et al.,

Filing 55

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 1/15/2015 ORDERING that third-party defendant Ozburn-Hessey Logistics's 48 motion to dismiss is GRANTED without leave to amend with respect to third-party plaintiff Pallets Unlimited's negligence claim and DENIED in all other respects. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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STARBUCKS CORPORATION, a
corporation,

CIV. NO. 2:13-1754 WBS CKD
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS FIRST AMENDED CROSSCOMPLAINT

Plaintiff,

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v.
AMCOR PACKAGING DISTRIBUTION,
et al.,
Defendants.

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This matter is again before the court on third-party

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defendant Ozburn-Hessey Logistics’ (“OHL”) motion to dismiss

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Pallets Unlimited’s First Amended Third-Party Complaint (“FATC”)

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(Docket No. 46) pursuant to Federal Rule of Civil Procedure

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12(b)(6) for failure to state a claim upon which relief can be

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granted, (Docket No. 48).

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set forth in this court’s Memorandum and Order of November 5,

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2014 (Docket No. 44) dismissing Pallets Unlimited’s original

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third-party complaint with leave to amend.

The factual and procedural history is

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Pallets Unlimited re-asserts its claims of equitable

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indemnification and negligence against OHL.

Whereas its original

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Third-party Complaint was silent as to the ownership of the

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pallets after they were given to OHL, Pallets Unlimited now

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alleges that Starbucks owned the coffee bags, coffee beans, and

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wooden pallets while they were kept at OHL’s warehouse.

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14.)

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these items for Starbucks as a “warehouseman/bailee.”

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allegedly kept the pallets in its warehouse until they were

(FATC ¶

Pallets Unlimited also adds an allegation that OHL stored
(Id.)

OHL

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shipped to Starbucks, during which time Pallets Unlimited

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maintains that OHL bore sole responsibility for storing and

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maintaining the pallets such that they did not develop mold.

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(Id. ¶¶ 9-10.)

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pallets made by Pallets Unlimited contained any mold or excessive

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moisture at the time they were delivered to OHL’s warehouse.

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(Id. ¶ 8.)

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The FATC also alleges that none of the wooden

In light of these new allegations, the court now

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addresses the sufficiency of the allegations of the FATC under

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the standards of Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

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(2007); and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

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I.

Equitable Indemnity Claim
As discussed at some length in this court’s Order of

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November 5, 2014, California law requires that, “[w]ith limited

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exception, there must be some basis for tort liability against

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the proposed indemnitor . . . generally based on a duty owed to

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the underlying plaintiff.”

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Forcum/Mackey Constr., Inc., 119 Cal. App. 4th 848, 852-53 (4th

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Dist. 2004).

BFGC Architects Planners, Inc. v.

Ordinary breach of contract, without something
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more, will not support liability in tort.

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21 Cal. 4th 543, 551-52 (1999).

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may constitute both a breach of contract and an invasion of an

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interest protected by the law of torts.”

See Erlich v. Menezes,

However, “the same wrongful act

Id. at 551.

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A.

A Bailee’s Duty with Regard to Bailed Goods

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“California law generally defines a bailment as the

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delivery of a thing in trust for a purpose upon an implied or

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express contract.”

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F.3d 312, 316 (9th Cir. 1993) (citing Greenberg Bros. v. Ernest

Whitcombe v. Stevedoring Servs. of Am., 2

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W. Hahn, Inc., 246 Cal. App. 2d 529, 531 (2d Dist. 1966)).

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Generally, contract terms govern bailment relationships.

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e.g., George v. Bekins Van & Storage Co., 33 Cal. 2d 834, 848-49

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(1949).

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See,

Several California statutes also impose an obligation

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to exercise a certain degree of care with regard to bailed

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property on the bailee--called a “depository” by the California

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Civil Code.1

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1852 states that “[a] depositary for hire must use at least

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ordinary care for the preservation of the thing deposited.”2

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Cal. Civ. Code § 1852.

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out an additional standard of care for a specific type of bailee

Of relevance here, California Civil Code section

The California Commercial Code also sets

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See Whitcombe, 2 F.3d at 316 (“The California Civil
Code uses the term depository and depositor in place of the
common law terms bailee and bailor. . . . The terms mean the same
things.”).
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California Civil Code section 1851 defines a nongratuitous deposit as “storage” and deems that “[t]he depositary
in such case is called a depositary for hire.” Cal. Civ. Code
§ 1851.
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called a “warehouse” or “warehouseman,”3 stating in section 7204

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that “[a] warehouse is liable for damages for loss of or injury

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to the goods caused by its failure to exercise care with regard

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to the goods that a reasonably careful person would exercise

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under similar circumstances.”

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Cal. Com. Code § 7204(a).

These statutory obligations bear a striking similarity

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to California’s general negligence statute, California Civil Code

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section 1714(a), which provides a duty that sounds in tort.

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Cal. Civ. Code § 1714(a) (“Everyone is responsible . . . for an

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injury occasioned to another by his or her want of ordinary care

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or skill . . .”); Cabral v. Ralphs Grocery Co., 51 Cal. 4th 764,

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771 (2011).

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a bailee or a warehouseman owes with respect to bailed property

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frequently describe a breach of that duty as “negligent” or

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“negligence,”4 although they leave the source of that duty and

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the kind of remedies available ambiguous.

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See

In addition, California courts that discuss the duty

Several authorities support the conclusion that these

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statutory duties give rise to tort liability.

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Uniform Commercial Code Comment included in California Commercial

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Code section 7101 notes that Article Seven “does not attempt to

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In particular, the

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The Civil Code defines a “warehouse” as “a person
engaged in the business of storing goods for hire.” Cal. Com.
Code § 7102(a)(13).
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See, e.g., Greenberg Bros., 246 Cal. App. 2d at 533 (“A
depositary or bailee for hire is liable only when he has been
guilty of some negligence. He is chargeable only with ordinary
care and diligence in safeguarding his bailor’s property . . .”
(quoting Baxter v. Shanley-Furness Co., 193 Cal. 558, 561
(1924)); Scott’s Val. Fruit Exch. v. Growers Refrigeration Co.,
81 Cal. App. 2d 437, 440 (1st Dist. 1947) (“[A]n action will lie
against a bailee for negligent destruction of or injury to
deposited goods.”).
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define the tort liability of bailees, except to hold certain

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classes of bailees to a minimum standard of reasonable care.”

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Cal. Com. Code § 7101 cmt. (emphasis added).

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suggests that the California Commercial Code actually does define

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the tort liability of those classes of bailee in Division Seven

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(the California equivalent of UCC Article Seven), including the

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“warehouse” bailee.

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Additionally, at least one California Court of Appeal has allowed

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a bailor to maintain causes of action for both breach of bailment

This comment

See Cal. Com. Code §§ 7102(a)(13), 7204(a).

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contract and negligence in tort after bailed property was

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damaged.

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Dist. 1985).

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See Gerbert v. Yank, 172 Cal. App. 3d 544, 549-50 (2d

OHL maintains that these statutes do not give rise to

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liability in tort but merely imply a duty of care into the terms

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of every bailment contract.

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supports its argument primarily with the California Court of

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Appeal case of Windeler v. Scheers Jewelers, 8 Cal. App. 3d 844

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(1st Dist. 1970).

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does not read Windeler as precluding the existence of an

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independent tort duty under either California Civil Code section

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1852 or California Commercial Code section 7204(a).

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of Windeler cited by OHL discusses damages for a plaintiff’s

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mental suffering and emotional distress, not damages to her

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property.

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statutory provisions at issue here apply specifically to bailed

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property and impose liability only for damage to that property.

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See Cal. Com. Code § 7204(a) (“A warehouse is liable for damages

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for loss of or injury to the goods caused by its failure to

(See OHL’s Reply at 7 n.7.)

(See OHL’s Reply at 7-9.)

However, this court

See Windeler, 8 Cal. App. 3d at 849-51.

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It

The section

Both

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exercise care with regard to the goods . . .” (emphasis added));

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Cal. Civ. Code § 1852 (“A depositary for hire must use at least

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ordinary care for the preservation of the thing deposited.”

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(emphasis added)).

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“warehouse” bailee that Pallets Unlimited alleges here.

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court thus finds Windeler distinguishable from the instant case.

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Nor did Windeler involve the kind of
The

Accordingly, because OHL has not provided, and the

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court cannot find, any persuasive authority that precludes tort

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liability under California Civil Code section 1852 or California

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Commercial Code section 7204(a), the court concludes that a

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“warehouseman/bailee” relationship may provide a basis for

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liability sounding in tort as between OHL and Starbucks.

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B.

Pallets Unlimited States a Claim for Equitable

Indemnity
Pallets Unlimited also plausibly alleges the remaining

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elements of equitable indemnity.

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because of OHL’s “lack of ordinary care in the management and

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maintenance of the OHL Warehouse, and its failure to exercise due

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diligence to ensure that [Starbucks’s] bags, beans and pallets

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suffered no harm while stored at the OHL Warehouse.”

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10, 14-15.)

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$4,932,115.76 in damages, which through this lawsuit, it has

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sought to recover from Amcor and Pallets Unlimited.

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Pallets Unlimited alleges that any liability it incurs to

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Starbucks is attributable to OHL’s fault.

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It alleges that mold developed

(FATC ¶¶ 9-

As a result, Starbucks allegedly suffered

(Id. ¶ 12.)

(Id. ¶ 17.)

Accordingly, because Pallets Unlimited has alleged a

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duty in tort between OHL and Starbucks, fault on the part of OHL,

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and resulting damages to Pallets Unlimited for which OHL is
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allegedly responsible, see Bailey v. Safeway, Inc., 199 Cal. App.

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4th 206, 217 (1st Dist. 2011) (listing elements), Pallets

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Unlimited has stated a plausible claim for equitable indemnity.

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The court must therefore deny OHL’s motion to dismiss this claim.

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II.

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Negligence Claim
In its November 5, 2014 Order, this court rejected

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Pallets Unlimited’s argument that OHL owed a duty to protect it

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from the prospect of purely economic loss it now faces as a

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result of Starbucks’s claims against it, noting that Pallets

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Unlimited did not allege any injury to its person or property,

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instead alleging only damages in the form of “potential

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liability” to Starbucks, as well as “damages relating to

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attorney’s fees and costs of suit herein.”

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California law, the court could not find any basis for such a

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duty. (See Nov. 5, 2014 Order at 12-16.)

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After surveying

The court sees no significant difference between the

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negligence claim it rejected in its prior Order and the

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negligence claim Pallets Unlimited re-asserts in its FATC.

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(Compare FATC ¶¶ 19-25, with Pallets’s Compl. ¶¶ 15-18.)

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Pallets Unlimited does not allege any injury to its person or

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property.

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Starbucks by failing to ensure that the bags, beans, and pallets

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owned by Starbucks were kept free of mold.

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Unlimited then asserts that, due to this breach, it has suffered

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damages in the form of “potential liability to [Starbucks],”

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“damages relating to attorneys’ fees and costs of suit herein.”

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(Id. ¶ 25.)

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Again,

Instead, it alleges that OHL breached its duty to

(FATC ¶ 24.)

What changes Pallets Unlimited does make to its
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Pallets

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negligence claim only strengthen the court’s conclusion that this

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negligence claim essentially duplicates Pallets Unlimited’s

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indemnification claim.

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(suggesting that Pallets Unlimited’s negligence claim might be

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construed as an attempt to salvage its indemnity claim).)

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time, Pallets Unlimited explicitly alleges that OHL should

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compensate it for any liability it incurs to Starbucks because

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“such liability would be solely, directly, and legally due to the

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primary and active fault . . . of Cross-Defendant OHL.”

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(See Nov. 5, 2014 Order at 15 n.7

This

(FATC ¶

24.)

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This new allegation repeats verbatim Pallets

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Unlimited’s allegation under its equitable indemnity claim.

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¶ 17 (“. . . such liability would be solely, directly and legally

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due to the primary and active fault . . . of Cross-Defendant

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OHL”).)

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negligence claim attempt to provide Pallets Unlimited with the

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same relief: compensation for the damages and costs it incurs in

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its suit against Starbucks.

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Pallets Unlimited is entitled to be indemnified for “damages,

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judgments, attorneys’ fees, and related costs or expenses

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incurred in defending the principal action”), with id. ¶ 25

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(stating that Pallets Unlimited has suffered damages including

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“potential liability to [Starbucks] based on [Starbucks’s]

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Complaint, damages relating to attorneys’ fees, and costs of suit

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herein”).)

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(Id.

Both Pallets Unlimited’s indemnity claim and its

(Compare FATC ¶ 18 (stating that

Nonetheless, Pallets Unlimited urges this court to

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recognize a new duty based on the “special relationship” between

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it and OHL by applying the factors enumerated by the California
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Supreme Court in J’Aire Corp. v. Gregory, 24 Cal. 3d 799 (1979).

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These factors include
(1) the extent to which the transaction was intended
to affect the plaintiff, (2) the foreseeability of
harm to the plaintiff, (3) the degree of certainty
that the plaintiff suffered injury, (4) the closeness
of the connection between the defendant’s conduct and
the injury suffered, (5) the moral blame attached to
the defendant’s conduct and (6) the policy of
preventing future harm.

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Id. at 804.

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A California Court of Appeal’s recent rejection of this

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argument is instructive.

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Cal. App. 4th 1318, 1340-42 (4th Dist. 2014).

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in that case also argued that the court should recognize a new

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duty of care under J’Aire.

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facts, the court in Mega RV applied the six J’Aire factors and

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concluded that none of them supported the recognition of such a

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duty.

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See Mega RV Corp. v. HWH Corp., 225

Id. at 1340-41.

The manufacturer

Faced with analogous

Id. at 1341-42.
Pallets Unlimited makes no attempt to distinguish Mega

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RV and fails to address the six J’Aire factors.

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that, because OHL and it were involved in a “chain of supply” for

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the wooden pallets at issue, and “[i]n the litigious world we

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live in,” it was “foreseeable” that Starbucks would seek

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compensation from Pallets Unlimited for damages caused to its

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property, OHL owed it a duty of care.

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Opp’n at 13-16.)

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to a duty under California law, see Erlich, 21 Cal. 4th at 552,

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and Pallets Unlimited provides no other reason for imposing a

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duty in this case.

It argues only

(See FATC ¶ 22; Pallets’s

However, foreseeability alone cannot give rise

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Accordingly, because no authority supports the

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existence of a duty of care between OHL and Pallets Unlimited and

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the court declines to recognize one under J’Aire, see Mega RV,

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225 Cal. App. 4th at 1338-42, the court must grant OHL’s motion

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to dismiss this claim.

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IT IS THEREFORE ORDERED that third-party defendant

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Ozburn-Hessey Logistics’s motion to dismiss be, and the same

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hereby is, GRANTED without leave to amend with respect to third-

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party plaintiff Pallets Unlimited’s negligence claim and DENIED

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in all other respects.

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Dated:

January 15, 2015

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