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

Filing 296

Order by Hon. Samuel Conti re: 273 Motion to Alter Judgment.(sclc1, COURT STAFF) (Filed on 5/30/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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

)
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Plaintiff,
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v.
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SEAMASTER LOGISTICS, INC., SUMMIT )
LOGISTICS INTERNATIONAL, INC.,
)
KESCO CONTRAINER LINE, INC.; KESCO )
SHIPPING, INC., and DOES 1 through )
20,
)
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Defendants.
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)
)

For the Northern District of California

United States District Court

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Case Nos. 11-cv-02861-SC

ORDER RE: SUMMIT US'S
MOTION TO ALTER OR AMEND
THE JUDGMENT

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I.

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INTRODUCTION
The Court issued Findings of Fact ("FF") and Conclusions of

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Law ("CL") in the above-captioned matter on March 21, 2013.

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No. 261.1

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Logistics International ("Summit US") and Kesco Container Line,

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Inc. ("Kesco") liable for intentional misrepresentation and

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conspiracy.

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the Court held them jointly and severally liable.

ECF

Among other things, the Court found Defendants Summit

Because Summit US and Kesco had conspired together,
The Court

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Mitsui O.S.K. Lines, Ltd. v. Seamaster Logistics, Inc., 11-CV02861-SC, 2013 WL 1191213, 2013 U.S. Dist. LEXIS 40466 (N.D. Cal.
Mar. 21, 2013).

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ultimately entered judgment against Summit US and Kesco for

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$8,284,393.11.

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the judgment pursuant to Federal Rule of Civil Procedure 59(e).2

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ECF No. 273 ("Mot.").

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finding it liable for torts completed before it joined the

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conspiracy.

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288 ("Reply").

ECF No. 262.

Now Summit US moves to alter or amend

Summit US argues that the Court erred by

The motion is fully briefed, ECF Nos. 285 ("Opp'n"),

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II.

BACKGROUND

United States District Court

For the Northern District of California

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A.

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Plaintiff Mitsui OSK Lines, Ltd. ("MOL"), a Vessel Operating

Factual Background

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Common Carrier, operates ships that carry cargo between foreign

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ports and the United States.

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Vessel Operating Common Carriers ("NVOCC"), contracted for space on

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MOL's vessels and resold that space to their own customers.

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moving cargo from Asia to the United States, MOL sometimes arranged

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trucking for its NVOCC customers through third-party truckers.

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example, at the behest of its customers, MOL paid third parties for

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trucking between factories in inland China to ports in Hong Kong.

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MOL would recover the trucking costs by charging its customers a

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higher rate for through carriage.

Defendants Summit US and Kesco, Non-

When

For

In this case, Kesco and Summit US conspired with Michael Yip,

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a high-level MOL employee, to induce MOL to pay for trucking that

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never actually occurred.

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arrangement," Summit US and Kesco requested that MOL arrange for

Under this so-called "Shenzhen door

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Summit US does not mention Rule 59 in its motion, but it does
cite to the rule in its reply in support of the motion. Reply at
1. As MOL does not take issue with this omission in its opposition
brief, neither will the Court.
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trucking between Shenzhen and Hong Kong and nominated Rainbow

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Trucking ("Rainbow") to perform the trucking services.

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pay Rainbow and charge Summit US and Kesco for each truck move.

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Because the price MOL paid to Rainbow was less than the extra

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charge to Defendants, MOL would lose money on each truck move.

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Unbeknownst to MOL, Rainbow did not actually perform any trucking

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and kicked back a portion of MOL's payments to Defendants to

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compensate them for requesting and paying for trucking services

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that they did not actually need.3

MOL would

United States District Court

For the Northern District of California

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The Shenzhen door arrangement began sometime in 2000.

At that

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time, Yip proposed the arrangement to one of Kesco's high-level

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officers, Raymond Cheng.

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with the help of two of his subordinates, Winnie Lau and Geoff

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Tice.

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trucking rates with MOL representatives.

Cheng carried out the scheme at Kesco

Lau booked the fake truck moves, and Tice negotiated

Much of the cargo moving under the Shenzhen door arrangement

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was connected to Fashion Merchandising Inc. ("FMI"), a company that

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performed warehousing and trucking services for a number of garment

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manufacturers, including Jones Apparel.

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strategic partners.

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States, Kesco acted as FMI's local handling agent in Hong Kong, and

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the two companies had a profit sharing agreement.

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player in the Shenzhen door arrangement, worked for both Kesco and

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FMI at various times.

FMI acted as Kesco's sales agent in the United

Tice, a key

In 2006, FMI was acquired by the newly formed Summit Group,

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FMI and Kesco were

which owned a number of other subsidiaries, including Summit US's

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Findings of Fact paragraphs 10 through 68 provide a more detailed
description of the Shenzhen door arrangement and Defendants'
involvement in the scheme.
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predecessor.

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local handling agent for the Jones Apparel business.

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continued to move Jones Apparel cargo under the Shenzhen door

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arrangement.

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where he continued to negotiate Shenzhen trucking rates without

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informing MOL that no trucking was actually taking place.

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After the acquisition, Kesco continued to act as the
It also

Tice eventually transitioned to the Summit Group,

In 2008, the Summit Group and its subsidiaries went through a

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strategic bankruptcy.

The companies were eventually liquidated,

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and their assets were purchased by TriDec Acquisition Co., Inc.

United States District Court

For the Northern District of California

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("TriDec"), which was managed by a number of Summit Group

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executives.

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interrupt the operations of the former Summit Group companies.

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same managers continued to run the companies before, during, and

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after the bankruptcy.

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continued to accept customer bookings, issue bills of lading, and

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manage the movement of cargo.

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2008 and primarily serviced beneficial cargo owners.

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through the end of 2008, Summit US used Kesco as its handling agent

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in Hong Kong.

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Shenzhen door arrangement.

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The bankruptcy and the TriDec acquisition did not
The

Throughout the process, these companies

Summit US was incorporated in March
From May 2008

Kesco booked many of Summit US's shipments using the

In an effort to completely transition the Jones Apparel

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business from Kesco to Summit US, Summit US created Summit

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Logistics International (SCM HK) Limited ("Summit SCM") in 2009.

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Summit SCM was a joint venture between Summit US and the three

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principal owners of Kesco.

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in January 2009 and supplanted Kesco as the agent in Hong Kong for

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Summit US shipments.

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door arrangement at Kesco were brought on to run Summit SCM.

The joint venture commenced operations

Two of the principal managers of the Shenzhen

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Cheng

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was initially hired as a consultant to assist with the start-up of

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Summit SCM's operations, and Lau was later hired to run day-to-day

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operations.

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moved from Kesco to Summit SCM.

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Rainbow to perform Summit SCM's trucking.

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Lau and Cheng, Summit SCM took part in the Shenzhen door

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arrangement.

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United States District Court

For the Northern District of California

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Lau continued to report to Cheng at Kesco after she
In January 2009, Cheng nominated
Under the direction of

Kesco and Summit terminated the Shenzhen door arrangement in
June 2010, when MOL inexplicably raised its rates for Shenzhen
trucking.

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B.

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MOL brought the instant action on June 10, 2011.

Procedural History
MOL's second

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amended complaint, the operative pleading in this matter, asserts

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causes of action for, inter alia, intentional misrepresentation and

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conspiracy.

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matter from January 28 through February 19, 2013.

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hearing oral arguments, the Court requested pre- and post-trial

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briefs, which the parties submitted.

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Trial Br."), 193 ("MOL Pre-Trial Br."), 253 ("MOL Post-Trial Br.")

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255 ("Summit Post-Trial Br.").

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that, under California law, all of the defendants should be held

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jointly and severally liable as coconspirators.

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at 28.

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issue in its briefing, but, at closing arguments, its counsel

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asserted that MOL had failed to clearly explain who had conspired

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with whom.

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conspired with Kesco since the two organizations were competitors.

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ECF No. 72.

The Court held a bench trial on this
In addition to

ECF Nos. 172 ("Summit Pre-

In its pre-trial brief, MOL argued

MOL Pre-Trial Br.

Summit US did not substantively address the conspiracy

Summit US also suggested that it could not have

The parties disputed whether Summit US could be held liable

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for shipments moving under the Shenzhen door arrangement prior to

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Summit US's incorporation in March 2008.

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could not be held liable for actions taken prior to its corporate

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existence and, in any event, MOL had not asserted a claim for

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successor liability.

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complaint adequately pleaded facts to put Summit on notice of a

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claim for successor liability.

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alternative, MOL moved to amend its complaint to add such a cause

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of action.

United States District Court

For the Northern District of California

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Summit US argued that it

MOL countered that its second amended

MOL Post-Trial Br. at 22.

In the

ECF No. 254.

The Court found in favor of MOL on its claims for intentional

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misrepresentation and conspiracy, holding Summit US and Kesco

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jointly and severally liable for $8,294,393.11.

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MOL's conspiracy claim, the Court found that Kesco had entered a

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conspiracy with Yip as early as 2000, when Yip and Cheng agreed to

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the Shenzhen door arrangement.

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joined the conspiracy as late as 2009 through Summit SCM, its joint

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venture with the Kesco partners.

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coconspirators, Summit US and Kesco could be held jointly and

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severally liable for the entire conspiracy, including acts

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committed in furtherance of the conspiracy prior to Summit US's

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incorporation.

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U.S. 640, 646-47 (1946)).

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not need to reach the issue of successor liability.

With respect to

The Court also found that Summit US

The Court held that, as

CL at 61-62 (citing Pinkerton v. United States, 328
As a result, the Court found that it did
Id. at 68-69.

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III. LEGAL STANDARD

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Pursuant to Federal Rule of Civil Procedure 59(e), a party may

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move to alter or amend the judgment no later than twenty-eight days

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after the entry of the judgment.

"Since specific grounds for a

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motion to amend or alter are not listed in the rule, the district

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court enjoys considerable discretion in granting or denying the

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motion.

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an extraordinary remedy which should be used sparingly."

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v. Calderon, 197 F.3d 1253, 1255 n.1 (9th Cir. 1999) (quoting 11

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Charles Alan Wright et al., Federal Practice and Procedure § 2810.1

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(2d ed. 1995)).

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Rule 59(e) motion: "(1) if such motion is necessary to correct

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manifest errors of law or fact upon which the judgment rests; (2)

However, reconsideration of a judgment after its entry is
McDowell

There are generally four grounds for granting a

United States District Court

For the Northern District of California

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if such motion is necessary to present newly discovered or

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previously unavailable evidence; (3) if such motion is necessary to

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prevent manifest injustice; or (4) if the amendment is justified by

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an intervening change in controlling law."

Id.

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IV.

DISCUSSION

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A.

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Summit US's primary argument is that the Court erred by

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holding it jointly and severally liable for torts completed before

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Summit US actually joined the conspiracy.

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that the Court need not consider the merits of this argument

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because it was not raised before judgment was entered and that, in

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any event, Summit US's substantive arguments concerning the

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controlling law are incorrect.

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Conspiracy and Joint and Several Liability

Mot. at 3.

MOL responds

As an initial matter, the Court finds that Summit US's motion

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is not procedurally improper.

It is true that Summit US could have

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(and probably should have) provided briefing on the issue of joint

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and several liability for conspiracy prior to judgment.

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MOL raised the issue in its pre-trial brief.

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After all,

However, the

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importance of the joint and several liability issue did not become

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apparent until the Court found both Kesco and Summit US liable for

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intentional misrepresentation and conspiracy.

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recognizes that it instructed the parties to keep their post-trial

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briefs short and to focus only on the issues that each party

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believed to be "very important."

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err in applying the law on this issue, a Rule 59(e) motion is the

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appropriate means for addressing that error.

Further, the Court

In any event, if the Court did

United States District Court

Accordingly, the Court turns to the merits of Summit US's

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For the Northern District of California

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motion, which hinges on whether a coconspirator may be held liable

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for torts completed before it joined the conspiracy.

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reviews two of the lead cases cited by both parties on this issue,

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de Vries v. Brumback, 53 Cal. 2d 643 (Cal. 1960), and Kidron v.

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Movie Acquisition Corp., 40 Cal. App. 4th 1571 (Cal. Ct. App.

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1995).

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conspiracy liability in civil and criminal law.

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analysis, the Court concludes that it erred in finding Summit US

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liable for torts committed and completed before it joined the

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conspiracy.

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The Court

The Court then reviews some of the distinctions between
Based on this

In de Vries, the defendant was sued for his participation in a

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conspiracy to dispose of property stolen from the plaintiff's

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jewelry store.

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stolen property could be fenced, the defendant agreed to join the

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conspiracy and took possession of the greater part of the stolen

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property.

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the question of whether all of the stolen property ever came into

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the defendant's possession, since the defendant joined the

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conspiracy while it was still ongoing and the purpose of the

Hours after the robbery, but before all of the

De Vries, 53 Cal. 2d at 646.

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The court found immaterial

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conspirators was to convert all of the stolen property.

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650.

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tortfeasor, liable for all of the stolen property.

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Id. at

Accordingly, the court held that the defendant was a joint

The California Court of Appeal later distinguished de Vries in
In that case, the plaintiff's former business partners

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Kidron.

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allegedly defrauded the plaintiff of his rights to a television

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series and then entered a distribution agreement for the series

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with Movie Acquisition Corp. ("MAC").

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1574-75.

Kidron, 40 Cal. App. 4th at

The plaintiff sued MAC for conspiracy to defraud.

The

United States District Court

For the Northern District of California

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court held that, unlike the defendant in de Vries, MAC did not join

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the alleged conspiracy "while the underlying tort was continuing."

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Id. at 1595.

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actionable when plaintiff's former business partners obtained

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control of the concept for the television series.

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months before MAC received any kind of notice of the plaintiff's

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fraud claim.

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As a matter of law, the conspiracy was completed and

This occurred

Summit US argues that the instant action is more like Kidron

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than de Vries.

Summit US essentially asks the Court to view the

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Shenzhen door arrangement as a series of torts, with each shipment

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moving under the arrangement giving rise to a separate claim for

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intentional misrepresentation.

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that each of these torts was completed as soon as MOL paid Rainbow

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for the shipment, which generally occurred within weeks or months

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after Summit US or Kesco booked the shipment.

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Summit US reasons that it cannot be held liable for Shenzhen door

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shipments booked and paid for before Summit US joined the

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conspiracy.

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liable for Shenzhen door shipments booked by Kesco between 2000 and

See Mot. at 5.

Summit US argues

Id.

Accordingly,

Summit US contends that the Court erred in holding it

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2008 since the Court found that Summit US did not join the

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conspiracy until 2009.

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MOL argues that the Court should not focus on when the

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underlying torts were completed, but on whether the conspiracy and

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its purpose had terminated by the time Summit US joined in 2009.

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In MOL's view, de Vries stands for just this proposition.

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MOL contends that Kidron is distinguishable since the purpose of

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the conspiracy alleged in that case had been fully achieved before

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the late-joining party got involved with the matter.

Further,

In contrast,

United States District Court

For the Northern District of California

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MOL argues, the Shenzhen door arrangement was still ongoing when

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Summit US joined the conspiracy as late as 2009.

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MOL's interpretation of the case law is unpersuasive.

Even if

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some language in de Vries implies that the court was focused on the

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status of the conspiracy rather than that of the underlying tort,

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the facts of that case are substantially different than those

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presented here.

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"within a few hours after the robbery[,] . . . and with full

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knowledge of the prior acts of his coconspirators, actively

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participated in the overall purpose to convert all of the stolen

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property to their use and benefit."

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case, Summit US joined the conspiracy several years after its

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inception.

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Kesco had already successfully moved thousands of shipments under

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the Shenzhen door arrangement.

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In de Vries, the defendant joined the conspiracy

53 Cal. 2d at 643.

In this

Further, by the time Summit US joined the conspiracy,

MOL cites a number of other cases applying California law on

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civil conspiracy.

Opp'n at 8-9 (citing Ally Bank v. Castle, 11-CV-

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896 YGR, 2012 WL 3627631 (N.D. Cal. Aug. 20, 2012); Wyatt v. Union

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Mortg. Co., 24 Cal. 3d 773 (Cal. 1979); Peterson v. Cruickshank,

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144 Cal. App. 2d 148 (Cal. Ct. App. 1956)).

Two of these cases

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state the general principle that a person who enters a conspiracy

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may be held liable for torts commenced before he or she enters into

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the conspiracy; however, they do not address the liability of a

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late-joining conspirator for completed torts.

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WL 3627631, at *10 (citing de Vries); Peterson, 144 Cal. App. 2d at

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168-69.

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statute of limitations for civil conspiracy does not begin to run

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until the completion of the last overt act taken in furtherance of

See Ally Bank, 2012

The other case merely stands for the proposition that the

United States District Court

For the Northern District of California

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the conspiracy.

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this principle has any relevance to the scope of liability for

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late-joining coconspirators.

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Wyatt, 24 Cal. 3d at 787-88.

It is unclear why

MOL also cites two cases applying federal law in the criminal

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conspiracy context.

Opp'n at 10 (citing United States v. Bibbero,

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749 F.2d 581 (9th Cir. 1984); United States v. Umagat, 998 F.2d 770

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(9th Cir. 1993)).

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who were held criminally liable for drug shipments completed before

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they joined the conspiracy.

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distinctions between criminal and civil conspiracy.

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the crime of conspiracy is the agreement to commit the unlawful

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act, while the gist of the tort is the damage resulting to the

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plaintiff from an overt act or acts done pursuant to the common

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design."

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not an independent tort, and "tort liability arising from

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conspiracy presupposes that the coconspirator is legally capable of

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committing the tort."

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Arabia Ltd., 7 Cal. 4th 503, 510-11 (Cal. 1994).

Both cases involve late-joining coconspirators

However, there are relevant

De Vries, 53 Cal. 2d at 649.

"The gist of

In civil law, conspiracy is

Applied Equipment Corp. v. Litton Saudi

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These distinctions are important for the purposes of the

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instant motion.

While a criminal defendant "who joins a pre-

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existing conspiracy is bound by all that has gone on before in the

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conspiracy," United States v. Saavedra, 684 F.2d 1293, 1301 (9th

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Cir. 1982), "an individual cannot be held criminally liable for

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substantive offenses committed by members of the conspiracy before

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that individual had joined or after he had withdrawn from the

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conspiracy," Levine v. United States, 383 U.S. 265, 266 (1966).

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The criminal cases cited by MOL, Bibbero and Umagat, address a

United States District Court

For the Northern District of California

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defendant's liability for conspiracy, not liability for any

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underlying substantive offense.

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statements concerning retroactive liability are inapplicable in the

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context of civil law, where a defendant cannot be held liable for

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conspiracy absent underlying tort liability.

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Garcia, 497 F.3d 964, 967 n.1 (9th Cir. 2007) (The proposition that

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a coconspirator is responsible for prior acts of an ongoing

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conspiracy "is correct only in the context of establishing

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vicarious liability for acts establishing the crime of conspiracy

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itself rather than vicarious liability for other substantive

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offenses committed in the course of a conspiracy." (emphasis in the

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original)).

Accordingly, Bibbero and Umagat's

Cf. United States v.

In this case, Summit US was legally incapable of committing

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the underlying tort of intentional misrepresentation at the

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inception of the conspiracy in 2000.

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incorporated until 2008, and its predecessor was not formed until

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2006.

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severally liable for acts committed before it joined the

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conspiracy.

Summit US was not

Accordingly, the Court erred in holding it jointly and

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B.

Successor Liability

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MOL contends that, if the Court reopens the judgment, it

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should consider imposing successor liability on Summit US.

Opp'n

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at 12.

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liability claims is now warranted.

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it did not need to consider the issue of successor liability

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because Summit US could be held jointly and severally liable for

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all acts committed in furtherance of the conspiracy, including

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those committed before Summit US joined the conspiracy.

The Court agrees that consideration of MOL's successor
The Court previously found that

As

United States District Court

For the Northern District of California

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discussed in Section IV.A supra, the Court's legal conclusions

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concerning joint and several liability were in error.

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issue of successor liability is now relevant to Summit US's overall

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liability.

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As such, the

The parties briefly addressed the issue of successor liability

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in their post-trial briefs, as well as in their briefing on MOL's

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conditional motion to amend the pleadings.

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either party, the Court hereby requests that the parties submit

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supplemental briefing on this issue.

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to address any issues they believe to be relevant to successor

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liability, but requests that they also address the following

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issues: (1) whether Summit US represents a mere continuation of the

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Summit Group or one of its subsidiaries, and whether such a finding

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is sufficient to trigger successor liability; (2) whether MOL has

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established alter ego liability between TriDec and Summit US, and

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whether this is necessary to establish successor liability; (3)

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whether MOL has proved that TriDec paid insufficient consideration

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for the assets of the Summit Group and whether this is necessary to

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establish successor liability; (4) if the Court declines to find

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To avoid prejudicing

The Court invites the parties

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successor liability, whether the Court may still hold Summit US

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liable for shipments made between March 2008 and January 2009.

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Court has set forth a briefing schedule in Section V below.

The

4

C.

Liability for Shipments Carried Out after July 2010

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The Court previously found that the Shenzhen door arrangement

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terminated in June 2010.

At trial, MOL presented evidence of its

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damages for each year of the conspiracy.

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evidence to calculate MOL's damages.

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MOL's 2010 damage figures included shipments made after the

The Court used this

Summit US now argues that

United States District Court

For the Northern District of California

10

termination of the conspiracy in June 2010 and that the Court erred

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in adopting these figures.

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identified what portion of the damages previously awarded is

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attributable to shipments made after June 2010.

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address this point in its briefing.

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ORDERS supplemental briefing on this issue.

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breakdown of its 2010 damages in accordance with the guidance set

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forth above, and Summit US shall have an opportunity to respond to

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those damage figures.

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///

Mot. at 9.

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However, Summit has not

MOL declined to

Accordingly, the Court hereby
MOL shall provide a

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V.

CONCLUSION

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For the reasons set forth above, the Court finds that it erred

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in holding Summit US jointly and severally liable for all shipments

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moving under the Shenzhen door arrangement between 2000 and 2010.

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The parties may submit supplemental briefing on the issue of

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successor liability within ten (10) days of the signature date of

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this Order.

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MOL shall also submit supplemental briefing on the issue of its

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2010 damage figures within ten (10) days of the signature date of

Each party's brief shall not exceed twenty (20) pages.

United States District Court

For the Northern District of California

10

this Order.

Defendants may respond to MOL's damages brief within

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ten (10) days.

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(5) pages.

Briefs on the damages issue shall not exceed five

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IT IS SO ORDERED.

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Dated:

May 30, 2013
UNITED STATES DISTRICT JUDGE

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