Mitsui O.S.K. Lines, Ltd. v. Seamaster Logistics, Inc. et al

Filing 166

Order by Hon. Samuel Conti granting in part and denying in part 123 Motion for Partial Summary Judgment.(sclc2, COURT STAFF) (Filed on 12/19/2012)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE NORTHERN DISTRICT OF CALIFORNIA

8
MITSUI O.S.K. LINES, LTD.,

) Case Nos. 10-cv-5591-SC
11-cv-2861-SC
)
Plaintiff,
)
) ORDER RE: MOTION FOR
v.
) PARTIAL SUMMARY JUDGMENT
)
SEAMASTER LOGISTICS, INC., SUMMIT )
LOGISTICS INTERNATIONAL, INC.,
)
AMERICAN GLOBAL LOGISTICS, LLC,
)
KESCO CONTAINER LINE, INC., KESCO )
SHIPPING, INC., and DOES 1 through )
20,
)
)
Defendants.
)
)

10
For the Northern District of California

United States District Court

9

11
12
13
14
15
16
17
18

I.

INTRODUCTION

19

Now pending before the Court is the motion of Defendant

20

American Global Logistics, LLC ("Defendant" or "AGL") for partial

21

summary judgment against Plaintiff Mitsui O.S.K. Lines, Ltd.

22

("Plaintiff" or "MOL").

23

fully briefed and, pursuant to Civil Local Rule 7-1(b), suitable

24

for decision without oral argument.

25

("Reply").

26

DENIED IN PART.

27

1

28

ECF No. 123 ("Mot.").1

The motion is

ECF Nos. 133 ("Opp'n"), 144

As set forth below, AGL's motion is GRANTED IN PART and

On December 7, 2012, the Court consolidated Case Nos. 10-cv-5591SC and 11-cv-2861-SC for trial. This Order cites to the latter
case's docket.

1
2

II.

BACKGROUND
The following background facts are undisputed.

The Shipping

3

Act of 1984, 46 U.S.C. §§ 40101 et seq. ("Shipping Act"), regulates

4

both vessel-operating common carriers ("VOCC") and non-vessel-

5

operating common carriers ("NVOCC").

6

carry cargo over water between the United States and foreign

7

countries for pay.

8

themselves out as common carriers but do not themselves operate

9

vessels; they use VOCCs to carry cargo over water and hence are

VOCCs operate ships that

See 46 U.S.C. §§ 40102(6), (17).

NVOCCs hold

See id. § 40102(16).

United States District Court

For the Northern District of California

10

shippers in their relationships to VOCCs.

11

VOCCs and NVOCCs may enter into service contracts whereby the

12

NVOCC, as shipper, commits to shipping a certain amount of cargo

13

over a period of time and the VOCC, as carrier, commits to giving

14

the shipper a certain rate and service level.

15

NVOCCs can also enter into service-contract-style arrangements

16

between themselves.

17

See id. § 40102(20).

See 46 C.F.R. §§ 531.1 et seq.

In addition to ocean shipping, both VOCCs and NVOCCs sometimes

18

contract to carry cargo overland.

19

either to or from a port -- that is, for the non-ocean portion of

20

the carriage -- is referred to as "inland carriage" or "drayage."

21

Carriage that includes both an inland and an ocean move is called

22

"through carriage" or "through transport."

23

40102(25).

24

and water, they may offer carriage from port to port, from "door to

25

door" (that is, from a shipment's inland point of origin to its

26

inland destination), or in combinations thereof.

27
28

Carriage by truck or other means

See 46 U.S.C. §

Because VOCCs and NVOCCs can carry cargo over both land

Plaintiff MOL is a VOCC.

All the named Defendants are NVOCCs.

The claims and allegations pertinent to the motion at bar relate to

2

1

shipments MOL undertook from southern China to the United States on

2

behalf of AGL, as well as Defendants SeaMaster Logistics, Inc.

3

("SeaMaster") and Summit Logistics International, Inc. ("Summit").

4

See generally SAC ¶¶ 20-44.2

5

individually and in conspiracy with each other, misrepresented the

6

points of origin and/or delivery for thousands of shipments, that

7

MOL was obliged to pay for the inland carriage for these shipments,

8

and that the inaccurate representations caused MOL to overpay for

9

trucking moves that either never occurred or were shorter than

United States District Court

For the Northern District of California

10

represented.

MOL alleges that Defendants,

See id. ¶¶ 24-25.

MOL alleges wrongdoing in both China and the United States.

11
12

In China, numerous shipments allegedly were represented to have

13

originated in Shenzhen when they actually originated, for

14

contractual purposes, at the port of egress.3

15

parties refer to this as the "Shenzhen trucking" scheme or

16

arrangement, as will the Court.

17

shipments allegedly were represented to require delivery further

18

away than the actual delivery address.

19

AGL used a company called Expedited to make these deliveries.

20

¶ 27.

Id. ¶ 24.

The

In the United States, numerous

Id. ¶ 25.

MOL alleges that
Id.

AGL denies wrongdoing.

21

It is undisputed that, for at least 600 of the challenged

22

shipments, AGL was the consignee or "notify party," while SeaMaster

23
24
25
26
27
28

2

On December 7, 2012, the Court denied MOL's motion to file a
Third Amended Complaint. ECF No. 160. Hence, Plaintiff's
operative pleading is the Second Amended Complaint. ECF No. 72
("SAC"). The SAC names additional defendants and asserts other
claims against non-AGL parties, but those claims and allegations do
not bear on AGL's motion.
3

The parties sometimes refer to a port as the "container yard" or
"CY."

3

Minck Decl. ¶ 5.4

1

was the shipper with respect to MOL.

For these

2

shipments, a U.S. buyer would hire AGL to move goods (for example,

3

furniture) from their place of manufacture in China to the buyer's

4

facility in the United States.

5

turn, had a Sales Agency and Destination Agent Agreement with

6

SeaMaster, under which AGL, as "sales" or "destination agent,"

7

would secure shipments for SeaMaster and SeaMaster would arrange

8

carriage for those shipments from China to the United States under

9

its (that is, SeaMaster's) service contract with MOL or another

See Briles Dep. 23:10-23.

AGL, in

See Briles Dep. 30:2-4; Rosenberg Dep. 65:10-16; Pl.'s Ex.

United States District Court

For the Northern District of California

10

VOCC.

11

143 (Sales Agency and Destination Agent Agreement ("Agr.")).

12

SeaMaster and AGL's Agreement identifies SeaMaster as the principal

13

in their relationship, see Agr., but the parties sometimes refer to

14

SeaMaster as the "overseas agent," see, e.g., Briles Dep. 44:13-24,

15

apparently in contrast to AGL's role as destination (that is,

16

domestic) agent.

17

ordered "FOB port" service, meaning that the Chinese seller was

18

responsible for delivery of the goods to the Chinese port, and

19

AGL's customer (hence, AGL) only took possession of the goods once

20

they were loaded on the ship in China.

21

Rosenberg Dep. 32:12-14.

Nearly all of AGL's customers -- 99 percent --

See Briles Dep. 23:10-11;

22
23
24
25
26
27
28

4

Warrin Minck (a senior internal auditor for MOL's American
division), Benjamin I. Fink (counsel for AGL), and Conte C. Cicala
(counsel for MOL) submitted declarations in connection with the
motion at bar. ECF Nos. 123-1 ("Fink Decl."), 134 ("Minck Decl."),
135 ("Cicala Decl."). Among other materials, Fink and Cicala both
included excerpts of transcripts of the depositions of Chad
Rosenberg (AGL's chief executive officer) and James Joseph Briles
III (AGL's chief operating officer). Fink Decl. Ex. A-1, Cicala
Decl. Ex. B ("Rosenberg Dep."); Fink Decl. Ex. A-2, Cicala Decl.
Ex. A ("Briles Dep."). Cicala included as part of the Rosenberg
Deposition excerpt various exhibits referenced in that deposition,
labeled as "Plaintiff's Exhibits."

4

1

AGL's booking of a shipment under the foregoing arrangement

2

would commence when the Chinese seller notified SeaMaster -- not

3

AGL -- that goods ordered by AGL's customer, the U.S. buyer, were

4

ready for shipment.

5

SeaMaster's offices in China would prepare and send to AGL via

6

email a spreadsheet showing new bookings, called the "daily routing

7

guide."

8

pertaining to the shipment's contents, destination, and port of

9

departure, as well as a recommended routing method and, usually,

Id.

See Briles Dep. 44:13-45:20.

Every day,

The daily routing guide contained information

Id. 43:15-18, 44:13-24, 46:11-47:7.

However,

United States District Court

For the Northern District of California

10

applicable rates.

11

with one exception not relevant here, it did not contain

12

information about the shipment's inland point of origin, i.e., the

13

location of the Chinese manufacturer.

14

Id. 47:8-20, 65:20-66:-8.

Inland origin information was contained, however, in bills of

15

lading for the shipments.

Two sets of bills of lading were created

16

for each shipment.

17

which would be provided to MOL's customers, the NVOCCs -- that is,

18

SeaMaster and AGL.

19

issued a "house" bill of lading which MOL would not receive.

20

id.; Minck Decl. ¶ 8.

21

shipment's point of origin as the "place of receipt" and the

22

shipment's final destination as the "place of delivery."

23

Pl.'s Ex. 145.

24

trucking arrangement, the master bill of lading would indicate a

25

place of receipt of "Shenzhen - Door," while the house bill of

26

lading would show the place of receipt to be the Chinese port (for

27

instance, Yantian).

28

Dep. 102:3-103:5; see also, e.g., Pl.'s Exs. 145-48 (examples of

As VOCC, MOL issued a "master" bill of lading

See Rosenberg Dep. 102:3-103:5.

SeaMaster
See

Both sets of bills of lading refer to the

E.g.,

For the shipments involved in the alleged Shenzhen

See Briles Dep. 67:1-7, 68:16-69:17; Rosenberg

5

1

MOL's master and SeaMaster's house bills of lading).

2

above, MOL declares that its records list AGL as consignee on at

3

least 600 such shipments.

4

both sets of bills of lading by Federal Express or a similar

5

delivery service.

Minck Decl. ¶ 5.

As stated

AGL received copies of

Briles Dep. 53:11-54:4.

6

The SAC asserts the following five claims against AGL (as well

7

as SeaMaster and Summit): (1) intentional misrepresentation and (2)

8

conspiracy to intentionally misrepresent, or, in the alternative,

9

(3) negligent misrepresentation; and civil RICO violations under

United States District Court

For the Northern District of California

10

(4) 18 U.S.C. § 1962(c) and (5) 18 U.S.C. § 1962(d).

AGL's motion

11

for partial summary judgment seeks judgment in its favor on three

12

different grounds.

13

extent they are premised on AGL's alleged misrepresentations made

14

in the course of the alleged Shenzhen trucking scheme.

15

seeks dismissal of all claims premised on AGL's alleged

16

participation in a conspiracy.

17

Plaintiff's RICO claims.

18

summary judgment with respect to allegedly misrouted U.S. inland

19

carriage.

First, AGL seeks dismissal of all claims to the

Second, AGL

Third, AGL seeks dismissal of

See Mot. at 3.

AGL does not move for

20
21

III. LEGAL STANDARD

22

Entry of summary judgment is proper "if the movant shows that

23

there is no genuine dispute as to any material fact and the movant

24

is entitled to judgment as a matter of law."

25

56(a).

26

require a directed verdict for the moving party.

27

Liberty Lobby, Inc., 477 U.S. 242, 251 (1986).

28

without the ultimate burden of persuasion at trial -- usually, but

Fed. R. Civ. P.

Summary judgment should be granted if the evidence would

6

Anderson v.
"A moving party

1

not always, a defendant -- has both the initial burden of

2

production and the ultimate burden of persuasion on a motion for

3

summary judgment."

4

Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000).

5

carry its burden of production, the moving party must either

6

produce evidence negating an essential element of the nonmoving

7

party's claim or defense or show that the nonmoving party does not

8

have enough evidence of an essential element to carry its ultimate

9

burden of persuasion at trial."

Nissan Fire & Marine Ins. Co., Ltd. v. Fritz

Id.

"In order to

"In order to carry its

United States District Court

For the Northern District of California

10

ultimate burden of persuasion on the motion, the moving party must

11

persuade the court that there is no genuine issue of material

12

fact."

13

resolving claims that depend on credibility determinations."

14

v. Ornoski, 431 F.3d 1158, 1170 (9th Cir. 2005).

Id.

Summary judgment, however, is inappropriate "for
Earp

15
16

IV.

DISCUSSION
A.

17

Misrepresentation
1.

18

Intentional Misrepresentation

Under California law,5 the elements of intentional

19
20

misrepresentation (that is, fraud) are: "(1) a misrepresentation

21

(false representation, concealment, or nondisclosure); (2)

22

knowledge of falsity (or scienter); (3) intent to defraud, i.e., to

23

induce reliance; (4) justifiable reliance; and (5) resulting

24

damage."

Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th

25
26
27
28

5

AGL acknowledges in a footnote that the parties have not briefed
choice-of-law issues. Mot. at 11 n.7. Both sides then proceed to
argue MOL's non-federal claims using California law without further
discussion of choice of law. The parties have thus acquiesced to
the application of California law for the non-federal claims. See
Hatfield v. Halifax PLC, 564 F.3d 1177, 1184 (9th Cir. 2009).

7

1

979, 990 (Cal. 2004) (quoting Lazar v. Superior Court, 12 Cal. 4th

2

631, 638 (Cal. 1996)).

3

AGL argues that there is no evidence that it ever made false

4

representations to MOL about inland trucking movements, concealed

5

any facts about them, or even knew about such movements, and that

6

therefore MOL cannot prove the element of scienter.

7

the testimony of its executives Rosenberg and Briles, both of whom

8

claim to have learned of the Shenzhen trucking arrangement only

9

when this lawsuit was filed.

AGL emphasizes

Rosenberg Dep. 50:1-8, 104:4-7;

United States District Court

For the Northern District of California

10

Briles Dep. 67:14-19.

AGL also offers the declaration of Jerry

11

Huang, a SeaMaster executive, who asserts that he never discussed

12

the Shenzhen trucking arrangement with anyone at AGL and that he

13

"ha[s] no information that AGL learned of the [a]rrangement through

14

AGL's business relationship with SeaMaster."

15

AGL also points to Rosenberg and Briles's testimony to the effect

16

that no one at AGL noticed the discrepancy between the master and

17

house bills of lading or that MOL's master bill of lading stated

18

the place of receipt to be an inland "door" rather than, as one

19

would expect for FOB port service, the outgoing port.

20

Dep. 102:11-103:5, 103:17-104:3; Briles Dep. 67:1-12.6

Huang Decl. ¶¶ 3-4.

Rosenberg

The Court concludes that it cannot enter summary judgment for

21
22

AGL on the basis of the denials of Briles, Huang, and Rosenberg

23

6

24
25
26
27
28

AGL also emphasizes deposition testimony by MOL's chief executive
officer, Masaru Satose. Fink Decl. Ex. C ("Satose Dep."). AGL
characterizes Satose as having "confirmed" that AGL was unaware of
the Shenzhen trucking arrangement. Mot. at 8. Satose's testimony,
however, merely evinces Satose's unfamiliarity with AGL. See
Satose Dep. 170:4-7 (Satose stating "No" when asked if he is
"familiar with AGL" or "know[s] anything about AGL"). As Satose
concedes, he did not know whether AGL participated in trucking
movements in China. Id. 172:16-19. That hardly "confirms" AGL's
lack of participation. Satose's testimony neither implicates nor
exonerates AGL.

8

1

because doing so would require the Court to make a determination of

2

their credibility.

3

where credibility is at issue."

4

1043, 1055 (9th Cir. 2008) (quoting S.E.C. v. Koracorp Indus.,

5

Inc., 575 F.2d 692, 699 (9th Cir. 1978)).

6

appropriately resolved only after a trial or evidentiary hearing.

7

Id.

8

Briles, Huang, or Rosenberg, but neither has the Court had an

9

opportunity to examine them and gauge their veracity.

United States District Court

For the Northern District of California

10

"[S]ummary judgment is singularly inappropriate
S.E.C. v. M & A W., Inc., 538 F.3d

Such issues are

Here, the Court has no reason to doubt the credibility of

AGL also argues that it is entitled to summary judgment on

11

MOL's fraud claim because AGL never made any affirmative

12

representation to MOL regarding the place of receipt for shipments

13

implicated in the Shenzhen trucking arrangement; thus, AGL argues,

14

MOL cannot establish the element of misrepresentation.

15

indicates, however, that it rests its fraud claim on a theory of

16

nondisclosure and concealment, specifically, AGL's nondisclosure

17

and alleged concealment of the discrepancy in the two sets of bills

18

of lading.

19

MOL

Opp'n at 8-9.

Ordinarily, nondisclosures are not actionable under California

20

law unless a confidential or fiduciary relationship between the

21

parties gives rise to an affirmative duty to disclose.

22

v. Kennedy, 18 Cal. 3d 335, 346-47 (Cal. 1976); 5 Witkin, Summary

23

10th (2005) Torts § 794.

24

relationship, a duty to disclose can arise "when the defendant

25

ha[s] exclusive knowledge of material facts not known to the

26

plaintiff" or "when the defendant actively conceals a material fact

27

from the plaintiff."

28

1187, 1199 (2011), review denied (Nov. 30, 2011) (alteration in

See Goodman

However, even in the absence of such a

Jones v. ConocoPhillips, 198 Cal. App. 4th

9

1

original) (internal quotation marks omitted).

2

disputes that AGL had both sets of bills of lading, that MOL had

3

only one, and that AGL did not affirmatively notify MOL of the

4

discrepancy between the two.

5

act of concealment or suppression.

6

Under California law, the elements of fraudulent concealment are:

7

9
10

United States District Court

MOL frames this nondisclosure as an
SAC ¶ 64; Opp'n at 8, 8 n.6.

(1) the defendant concealed a material fact;
(2) the defendant was under a duty to disclose
the fact to the plaintiff; (3) the defendant
concealed or suppressed the fact with an intent
to defraud; (4) the plaintiff was unaware of
the fact and would have acted if he or she had
known about it; and (5) the concealment caused
the plaintiff to sustain damage.

8

For the Northern District of California

Neither party

11
12

Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1156 n.3 (9th

13

Cir. 2000).
MOL identifies AGL's false positive assertion as an assertion

14
15

that the shipments originated from "Shenzhen - Door" when in fact

16

they did not, and AGL's concealment as its failure to disclose that

17

the drayage in China consisted of container yard moves rather than

18

shipments from inland factories.

19

suggests that the daily routing guide received by AGL from

20

SeaMaster does not identify the shipment's point of origin.

21

Dep. 47:8-20, 65:20-66:-8.

22

concealment must be premised on the mismatched bills of lading.

Uncontroverted evidence strongly

Briles

Thus, the claim of nondisclosure and

The Court observes that the fact that the bills of lading

23
24

contained a mismatch may not be enough to establish AGL's actual

25

knowledge of the mismatch.

26

bills of lading and offers testimony that it had no reason to do

27

so.

28

suggests that constructive knowledge of the bills of ladings'

AGL, after all, denies having read the

Briles Dep. 68:16-69:7; Rosenberg Dep. 103:17-104:3.

10

MOL

1

contents may be imputed to AGL.7

2

cases addressing the "exclusive knowledge" species of nondisclosure

3

appear to involve actual knowledge of the undisclosed facts, as

4

opposed to merely constructive knowledge.8

5

case standing for the proposition that a party has a duty to

6

disclose facts of which it has only constructive knowledge.

7

Neither does MOL say how constructive knowledge could satisfy

8

California law's requirement that the defendant know the

9

materiality of the omitted fact.

However, the leading California

MOL has not cited any

See Goodman, 18 Cal. 3d at 347.

United States District Court

For the Northern District of California

10

MOL comes closer to the mark when it cites regulations

11

promulgated by the Federal Maritime Commission to implement

12

provisions of the Shipping Act.

13

these regulations provide, in pertinent part:

14

See Opp'n at 5-6.

As MOL notes,

(e)
False
or
fraudulent
claims,
false
information. No licensee shall prepare or file
or assist in the preparation or filing of any
claim, affidavit, letter of indemnity, or other
paper
or
document
concerning
an
ocean
transportation intermediary transaction which
it
has
reason
to
believe
is
false
or
fraudulent,
nor
shall
any
such
licensee
knowingly impart to a principal, shipper,
common
carrier
or
other
person,
false
information
relative
to
any
ocean
transportation intermediary transaction.

15
16
17
18
19
20
7

21
22
23
24
25
26
27
28

See Opp'n at 9-10 (stating that "accurate information reflecting
both the origin and destination of each shipment was contained in
the NVOCC house bill of lading" and concluding that "AGL clearly
knew that the 'Shenzhen door' place of receipt reflected in MOL's
bill of lading was false"); see also id. at 16-18 (arguing, in the
context of MOL's negligent misrepresentation claim, that AGL had
constructive knowledge of the contents of the bills of lading).

8

See De Spirito v. Andrews, 151 Cal. App. 2d 126, 130-31 (Cal. Ct.
App. 1957); Lingsch v. Savage, 213 Cal. App. 2d 729, 735-37 (Cal.
Ct. App. 1963); Massei v. Lettunich, 248 Cal. App. 2d 68, 72-73
(Cal. Ct. App. 1967); Goodman v. Kennedy, 18 Cal. 3d 335, 347-48
(Cal. 1976); Wells v. John Hancock Mut. Life Ins. Co., 85 Cal. App.
3d 66, 70-73 (Cal. Ct. App. 1978); Magpali v. Farmers Group, Inc.,
47 Cal. App. 4th 1024, 482 (Cal. Ct. App. 1996); see also 5 Witkin,
Summary 10th (2005) Torts § 796.

11

1

(f) Errors and omissions of the principal or
shipper. A licensee who has reason to believe
that its principal or shipper has not, with
respect to a shipment to be handled by such
licensee, complied with the laws of the United
States,
or
has
made
any
error
or
misrepresentation in, or omission from, any
export declaration, bill of lading, affidavit,
or other document which the principal or
shipper executes in connection with such
shipment, shall advise its principal or shipper
promptly of the suspected noncompliance, error,
misrepresentation
or
omission,
and
shall
decline to participate in any transaction
involving such document until the matter is
properly and lawfully resolved.

2
3
4
5
6
7
8
9

United States District Court

For the Northern District of California

10

46 C.F.R. § 515.31(e)-(f) (emphases added).

These regulations put

11

licensees like AGL under an affirmative obligation to refrain from

12

preparing documents containing false information (provided the

13

licensee has reason to believe it is false) and refrain from

14

imparting false information (provided that is done knowingly), as

15

well as to point out errors, misrepresentations, or omissions in,

16

inter alia, bills of lading (provided the licensee has reason to

17

believe the document contains such inaccuracies).

18

appears to be that it did not know, and had no reason to know, of

19

any falsities or omissions in the bills of lading.

20

position rests on Briles and Rosenberg's denials that AGL read or

21

knew the contents of the bills of lading.

22

Court cannot credit those denials without impermissibly making a

23

credibility determination.

AGL's response

However, that

As explained above, the

The parties raise a number of other, ancillary arguments and

24
25

matters in connection with this claim, but the Court need not

26

address them.9

27

9

28

AGL's motion for summary judgment on this claim is

Among the ancillary matters raised by the parties is an
arbitration award first discussed by MOL in its opposition, and
further discussed by AGL in its reply. MOL objected to AGL's

12

1

ultimately premised on the credibility of Briles and Rosenberg's

2

denials and, because the Court cannot rely on credibility

3

determinations to enter summary judgment, the Court DENIES AGL's

4

motion for partial summary judgment as to MOL's claim for

5

intentional misrepresentation in connection with the Shenzhen

6

trucking arrangement.

7

2.

8
9

Negligent Misrepresentation

Negligent misrepresentation differs from fraud in that it
"does not require scienter or intent to defraud."

See Small v.

United States District Court

For the Northern District of California

10

Fritz Companies, Inc., 30 Cal. 4th 167, 173-74 (Cal. 2003) (quoting

11

Gagne v. Bertran, 43 Cal. 2d 481, 487–488 (Cal. 1954)).

12

misrepresentation

13
14
15
16

Negligent

encompasses "[t]he assertion, as a fact, of
that which is not true, by one who has no
reasonable ground for believing it to be true"
and "[t]he positive assertion, in a manner not
warranted by the information of the person
making it, of that which is not true, though he
believes it to be true."

17

Id. at 174 (quoting Cal. Civ. Code §§ 1710(2), 1572(2))

18

(alterations in original; citations omitted).

19

negligent misrepresentation further differs from intentional

20

misrepresentation in that, while certain nondisclosures may support

21

a claim for intentional misrepresentation, a negligent

22

misrepresentation claim requires a "positive assertion," and hence

23

"omissions" -- that is, nondisclosures -- cannot give rise to

24

liability for negligent misrepresentation.

25
26
27
28

In California,

Lopez v. Nissan N. Am.,

discussion of the arbitration award on the ground that AGL should
not be permitted to raise new arguments on reply. ECF No. 151.
AGL filed a response to the objection. ECF No. 162. Because the
Court disposes of the instant motion without needing to refer to
the matters that are subject of MOL's objection (matters that the
Court finds largely irrelevant), the objection is moot and hence
OVERRULED.

13

1

Inc., 201 Cal. App. 4th 572, 596 (Cal. Ct. App. 2011), reh'g denied

2

(Dec. 30, 2011), review withdrawn (Mar. 14, 2012); Wilson v.

3

Century 21 Great W. Realty, 15 Cal. App. 4th 298, 306 (Cal. Ct.

4

App. 1993).

5

result possible under California law: The same failure to disclose

6

may support a claim for intentional misrepresentation but not

7

negligent misrepresentation.10

This difference makes an admittedly counterintuitive

8

In the case at bar, MOL argues that language in MOL's bill of

9

lading and waybills resulted in AGL's being liable in tort for the

United States District Court

For the Northern District of California

10

truth of the information contained in those bills of lading.

The

11

argument relies on three provisions in MOL's combined transport

12

bill of lading.

13

include the "Consignee" of goods shipped under that bill.

14

Decl. ¶ 9, Ex. A at 1.

15

the consignee and notify party on many of the shipments implicated

16

in the Shenzhen trucking arrangement.

17

states that that "[a]ll of the [p]ersons coming within the

18

definition of Merchant . . . shall be jointly and severally liable

19

to the Carrier for the due fulfillment of all obligations of the

20

Merchant in this Bill of Lading."

21

Third, the bill of lading states that the "Merchant warrants to the

22

Carrier [i.e., to MOL] that the particulars relating to the Goods

23

as set out overleaf have been checked by the Merchant on this Bill

24

of Lading and that such particulars and any other particulars

First, the bill of lading defines "Merchant" to
Minck

There is no dispute that AGL was listed as

Second, the bill of lading

Minck Decl. ¶ 9, Ex. A at 6.

25
26
27
28

10

Cf. Lopez, 201 Cal. App. 4th at 596 (noting that claim for
negligent misrepresentation cannot be based on an omission, but
claim for intentional misrepresentation can); Oakland Raiders v.
Oakland-Alameda Cnty. Coliseum, Inc., 144 Cal. App. 4th 1175, 1184
(Cal. Ct. App. 2006) (torts of intentional and negligent
misrepresentation are "separate and distinct").

14

1

furnished by or on behalf of the Shipper are accurate and correct."

2

Minck Decl. ¶ 9, Ex. A at 6-7.

3

purports to impose joint and several liability on non-shippers like

4

AGL for representations made by shippers like SeaMaster.

5

the Court to conclude that this language makes AGL responsible for

6

the false "positive assertions" of fact that made their way into

7

the master bills of lading.

8

In summary, the bill of lading

MOL asks

MOL cites a number of cases addressing the binding effect of

United States District Court

bills of lading on consignees like AGL, Opp'n at 5 n.4, but the

10
For the Northern District of California

9

Court finds them inapplicable to the matter of tort liability.

11

cases speak to different legal issues than the one presented here,

12

for instance, whether language like that contained in MOL's

13

waybills can support joint and several liability for unpaid freight

14

charges, whether the shipping rates set forth in tariffs are

15

enforceable in contract, or whether the terms in a short-form bill

16

of lading may incorporate the terms of a long-form bill of lading.

17

That is, all of the cases address points of contract law.

18

Court finds no support in those cases, however, for the proposition

19

that the language in MOL's bill of lading can result in joint and

20

several liability in tort.

21

to demonstrate that a failure to comply with the Federal Maritime

22

Commission regulations discussed in the previous section can

23

support liability in tort (assuming for the sake of argument that

24

AGL did so fail).

25

The

The

Neither has MOL marshaled any authority

In the absence of any evidence that AGL itself positively but

26

inaccurately asserted the place of receipt for the shipments

27

implicated in the Shenzhen trucking arrangement, California law

28

15

1

entitles AGL to summary judgment on MOL's negligent

2

misrepresentation claim.11
Accordingly, AGL's motion for summary judgment is GRANTED with

3
4

respect to the negligent misrepresentation claim.12

5

B.

Conspiracy

6

In addition to its misrepresentation claims against AGL, MOL

7

also asserts a claim for conspiring to commit fraud.

SAC ¶¶ 68-73.

8

MOL names Seamaster and Summit in this claim, in addition to AGL.

9

Id.

Under California law, civil "[c]onspiracy is not a cause of

United States District Court

For the Northern District of California

10

action, but a legal doctrine that imposes liability on persons who,

11

although not actually committing a tort themselves, share with the

12

immediate tortfeasors a common plan or design in its perpetration."

13

Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503,

14

510-11 (Cal. 1994).

15

the "commission of an actual tort."

16

tort occurs, the elements of civil conspiracy under California law

17

are: "[1] formation and operation of the conspiracy, [2] wrongful

18

act or acts done pursuant thereto, and [3] damage."

19

v. Deloitte Consulting LLP, 836 F. Supp. 2d 1030, 1045 (N.D. Cal.

20

2011) (citing Mosier v. S. California Physicians Ins. Exch., 63

21

Cal. App. 4th 1022, 1048 (Cal. Ct. App. 1998)).

Thus, a claim for civil conspiracy rests on
Id. at 511.

Assuming such a

Cnty. of Marin

22
23
24
25
26
27
28

11

The Court held to the contrary in Mitsui O.S.K. Lines, Ltd. v.
Allied Transp. Sys. (USA), Inc., 10-5586 SC, 2011 WL 5861642, at
*5-6 (N.D. Cal. Nov. 22, 2011). In that case, however, the moving
party did not distinguish between intentional and negligent
misrepresentation.
12

In the absence of evidence of any positive assertion by AGL, the
Court need not, and does not, reach MOL's argument that the rate
AGL received on the shipments implicated in the Shenzhen trucking
arrangement should have alerted it that it was getting a deal "too
good to be true." See Opp'n at 18.

16

1

Here, AGL seeks summary judgment as to MOL's claim that it

2

conspired in the Shenzhen trucking fraud on the ground that MOL has

3

produced no evidence that AGL knew of or participated in such a

4

conspiracy.

5

testimony of Jerry Huang, the SeaMaster executive.

6

Ex. C. ("Huang Dep.") 226:4-237:11.

7

appeared to admit to knowledge of the Shenzhen trucking

8

arrangement.

9

various interactions between Summit, Seamaster, an MOL employee

MOL responds by citing to excerpts of the deposition
Cicala Decl.

In his deposition, Huang

However, although Huang discussed in his deposition

United States District Court

For the Northern District of California

10

named Michael Yip (whom MOL claims participated in the fraudulent

11

scheme), and a trucking company called Rainbow, Huang never

12

mentioned AGL.

13

testimony as an admission of the existence of a conspiracy to

14

defraud MOL and then to infer from AGL's identification on bills of

15

lading as consignee and notify party that AGL knew of and

16

participated in the conspiracy.

17

reasonable inferences, but that is a leap too far.

18

AGL carried its initial burden of production by showing that MOL

19

lacks sufficient evidence to establish the "knowledge and

20

participation" element of its conspiracy claim.

21

Marine, 210 F.3d at 1102.

22

evidence to create a genuine issue of material fact."

23

The only evidence MOL has produced as to AGL's awareness of the

24

conspiracy is evidence which does not mention AGL at all.

25

MOL produces evidence of a conspiracy involving similarly situated,

26

but different, parties.

27

enough to avoid summary judgment.

MOL asks the Court to read Huang's deposition

MOL is entitled to favorable
Essentially,

See Nissan Fire &

MOL therefore must "produce enough
Id. at 1103.

At best,

This mere "scintilla" of evidence is not

28

17

See Anderson, 477 U.S. at 252.

1

Accordingly, the Court GRANTS AGL's motion for summary

2

judgment as to MOL's claim for conspiracy to commit fraud in

3

connection with the Shenzhen trucking scheme.

4

C.

5

The civil RICO statute provides:

6
7
8
9

RICO

It shall be unlawful for any person employed by
or associated with any enterprise engaged in,
or the activities of which affect, interstate
or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of
racketeering activity or collection of unlawful
debt.

United States District Court

For the Northern District of California

10
11

18 U.S.C. § 1962(c).

12

plaintiff must allege '(1) conduct (2) of an enterprise (3) through

13

a pattern (4) of racketeering activity.'"

14

486 F.3d 541, 547 (9th Cir. 2007) (quoting Sedima, S.P.R.L. v.

15

Imrex Co., Inc., 473 U.S. 479, 496 (1985)).

16

"To state a claim under § 1962(c), a

Odom v. Microsoft Corp.,

Though the parties submit arguments pertaining to each element

17

of MOL's § 1962(c) claim, the Court concludes that it need proceed

18

no further than the first element, "conduct."

19

requirement under § 1962(c) means that '[i]n order to "participate,

20

directly or indirectly, in the conduct of such enterprise's

21

affairs," one must have some part in directing those affairs."

22

Eclectic Properties E., LLC v. The Marcus & Millichap Co., C-09-

23

00511 RMW, 2012 WL 713289, at *6 (N.D. Cal. Mar. 5, 2012)

24

(alteration in original) (quoting Reves v. Ernst & Young, 507 U.S.

25

170, 179 (1993)).

26

first articulated in Reves, "[s]imply performing services for the

27

enterprise does not rise to the level of direction, whether one is

28

'inside' or 'outside,'" that is, part or not part of the

"The conduct

Under this "operation and management" test,

18

1

enterprise.

2

Walter v. Drayson, 538 F.3d 1244, 1249 (9th Cir.

2008).
Here, MOL offers insufficient evidence to raise a triable

3
4

issue of material fact as to whether AGL had "some part in

5

directing" the enterprise.

6

relationship of the participants in the [alleged] fraudulent

7

activity," and submits evidence that Huang and Rosenberg, now

8

executives of SeaMaster and AGL, respectively, had business

9

dealings from 1998 to 2006, as executives of companies called Hecny

MOL points to "the historical

United States District Court

For the Northern District of California

10

and Global Link, respectively.

Opp'n at 20 (citing Rosenberg Dep.

11

12:11-13:19, 14:4-8).

12

in 2008 to perform substantially the same role that Hecny performed

13

for Global Link.

Id. at 20-21 (citing Rosenberg Dep. 43:25-44:12;

14

Pl.'s Ex. 143).13

MOL then describes a "parallel" enterprise

15

involving Defendants Kesco and Summit, but not AGL.

16

MOL notes that SeaMaster is part of the Summit group of companies.

17

Id.

MOL describes AGL as having hired SeaMaster

Id. at 21.

None of this explains how AGL has "some part in directing" the

18
19

enterprise's affairs.

At most, it suggests that AGL may have been

20

part of an enterprise.

But merely being part of the enterprise is

21

not enough.

22

that benefit the enterprise is not enough.

23

at Baltimore v. Peat, Marwick, Main & Co., 996 F.2d 1534, 1539 (3d

24

Cir. 1993); see also Baumer v. Pachl, 8 F.3d 1341, 1345 (9th Cir.

25

13

26
27
28

See Walter, 538 F.3d at 1249.

Even providing services
See Univ. of Maryland

Rosenberg himself, however, did not come to work for AGL until
2009 and thus was not employed by AGL at the time AGL hired
SeaMaster through Huang, as MOL itself notes. Opp'n at 14 (citing
Rosenberg Dep. 41:18-25). MOL asserts, without citing to evidence,
that "Global Link's former management team, now operating AGL,
clearly continued [Global Link's] fraudulent schemes relating to
MOL shipments." Id.

19

1

1993) (citing Univ. of Maryland with approval).

In short, even if

2

the Court assumes that AGL participated in the asserted RICO

3

enterprise, MOL offers no evidence that AGL had any part in

4

operating or managing it.

5

Reves's "operation and management" test, the Ninth Circuit has

6

looked at whether a party: gives or takes direction in the

7

enterprise; "occup[ies] a position in the chain of command" of the

8

enterprise; "knowingly implements decisions" of the enterprise; or

9

is "indispensable to achievement of the enterprise's goal."

In considering what activities satisfy

See

United States District Court

For the Northern District of California

10

Walter, 538 F.3d at 1249.

MOL offers no evidence on these points.

11

MOL relies on evidence of the existence of a longstanding business

12

relationship between a principal of AGL and a principal of

13

SeaMaster.

14

considerations raised in the Court's discussion of MOL's conspiracy

15

claim also apply here.

16

suggests, at best, a parallel enterprise involving companies

17

similarly situated to, but different from, AGL.

That is not enough to establish RICO "conduct."

See Section IV.B supra.

The

MOL's evidence

18

MOL makes much of the conduct of Global Link, a now-defunct

19

entity formerly helmed by Rosenberg which is not a party to this

20

lawsuit.

21

to Global Link is admissible under Federal Rule of Evidence

22

404(b)(2) to show "motive, opportunity, intent, preparation, plan,

23

knowledge, identity, absence of mistake[,] or lack of accident."

24

Opp'n at 14 n.10.

25

would be admissible for that purpose and (2) that the evidence

26

establishes that Rosenberg used Global Link to commit RICO

27

violations against MOL, it still would not show that Rosenberg or

28

AGL directed any RICO enterprise in this case.

See Opp'n at 13-14.

MOL asserts that evidence pertaining

Assuming without deciding that (1) the evidence

20

1

MOL cites two out-of-circuit cases for the proposition that

2

"[i]t is not necessary to prove that every member of the enterprise

3

participated in or knew about all of its activities."

4

(internal quotation marks omitted) (citing United States v.

5

Cagnina, 697 F.2d 915, 922 (11th Cir. 1983); United States v.

6

Rastelli, 870 F.2d 822, 827-28 (2d Cir. 1989)).

7

holds in the situations where it applies, but this is not one of

8

those situations.

9

requirements for alleging the existence of an enterprise -- a

Opp'n at 20

That proposition

The cited discussions in Cagnina dealt with the

United States District Court

For the Northern District of California

10

separate consideration from showing "conduct" under Reves's

11

"operation and management" test.

12

government must prove in a criminal RICO case to prove a RICO

13

conspiracy (as compared to the non-conspiracy civil claim arising

14

under § 1962(c)).

15

that is relevant here.

16

Rastelli addressed what the

Neither case addresses the issue of "conduct"

In conclusion, MOL has not carried its burden of showing a

17

triable issue of material fact as to the "conduct" requirement of

18

its § 1962(c) claim.

19

for partial summary judgment as to that claim.

20

Accordingly, the Court GRANTS AGL's motion

MOL also asserts a § 1962(d) claim against, inter alia, AGL.

21

Section 1962(d) simply proscribes conspiring to commit RICO

22

violations and thus depends on the viability of an underlying RICO

23

claim.

See Howard v. Am. Online Inc., 208 F.3d 741, 751 (9th Cir.

24

2000).

None being present here, AGL is entitled to summary

25

judgment as to MOL's § 1962(d) claim.

26

conspiracy also supports entry of summary judgment on this claim.

27

See Section IV.B supra.

28

for partial summary judgment as to MOL's § 1962(d) claim.

The absence of evidence of

Accordingly, the Court GRANTS AGL's motion

21

1

V.

CONCLUSION

2

For the foregoing reasons, the Court PARTIALLY GRANTS and

3

PARTIALLY DENIES the motion of Defendant American Global Logistics,

4

LLC for partial summary judgment.

5

Ltd.'s claims for negligent misrepresentation, conspiracy to

6

intentionally misrepresent, civil RICO violations, and civil RICO

7

conspiracy are DISMISSED as to AGL.

8

intentional misrepresentation remains undisturbed as to AGL.

Plaintiff Mitsui O.S.K. Lines,

Plaintiff's claim for

9

United States District Court

For the Northern District of California

10

IT IS SO ORDERED.

11
12
13

Dated: December 19, 2012
UNITED STATES DISTRICT JUDGE

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

22