Service First Logistics, Inc. v. J Rodriguez Trucking, Inc.
ORDER Granting 12 Defendant's Amended Motion to Set Aside Default and Default Judgment, Motion to Dismiss for Lack of Subject Matter Jurisdiction, Vacating the Entry of Default 6 , and the Default Judgment 10 and Dismissing Plaintiff's Cause of Action Without Prejudice. Signed by District Judge Denise Page Hood. (LSau)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SERVICE FIRST LOGISTICS, INC.,
Case No. 16-14337
Hon. Denise Page Hood
J. RODRIGUEZ TRUCKING, INC.,
ORDER GRANTING DEFENDANT’S AMENDED
MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT, MOTION TO DISMISS FOR LACK OF
SUBJECT MATTER JURISDICTION [Dkt. No. 12],
VACATING THE ENTRY OF DEFAULT [Dkt. No. 6]
AND THE DEFAULT JUDGMENT [Dkt. No. 10] and
DISMISSING PLAINTIFF’S CAUSE OF
ACTION WITHOUT PREJUDICE
On January 18, 2017, the Court entered Default Judgment against Defendant.
On February 2, 2017, Defendant filed its Amended Motion to Set Aside Default and
Default Judgment, Motion to Dismiss for Lack of Subject Matter Jurisdiction and
Lack of Personal Jurisdiction (“Amended Motion”). Dkt. No. 12. The motion has
been fully briefed. The Court, having concluded that the decision process would not
be significantly aided by oral argument, ordered that the motions be resolved on the
motion and briefs submitted by the parties. E.D. Mich. L.R. 7.1(f)(2). Dkt. No. 13.
For the reasons that follow, the Court sets aside the entry of default and default
judgment against Defendant and dismisses Plaintiff’s cause of action, without
prejudice, for lack of subject matter jurisdiction.
This case stems from a shipment of produce (lettuce products) that Plaintiff
contracted with Defendant to have Defendant deliver. Plaintiff alleges that Defendant
failed to properly refrigerate the load at 35 degrees Farenheit, which caused the
products to spoil and the consignee to reject the entire load. The spoiled products
caused Plaintiff to incur a loss of $21,863.32, which amount Defendant refused to
Plaintiff filed this action on December 13, 2016, asserting that this Court had
subject matter jurisdiction pursuant to 49 U.S.C. § 14706 (the “Carmack
Amendment”). A certificate of service and summons was executed on December 19,
2016, and Defendant’s answer was due on January 9, 2017. When Defendant did not
file an answer, Plaintiff moved for and was granted a Clerk’s Entry of Default on
January 10, 2017. Dkt. Nos. 5 and 6. Plaintiff served Defendant with the Clerk’s
Entry of Default on January 12, 2017, Dkt. No. 7, and Plaintiff moved for entry of
judgment by default with affidavit of sum certain on January 17, 2017, Dkt. No. 8, the
same day that counsel for Defendant filed an appearance in this case. Dkt. No. 9. On
January 18, 2017, the Clerk of the Court entered Judgment by Default. Dkt. No. 10.
On February 2, 2017, Defendant filed a Motion to Set Aside Default and Default
Judgment, Motion to Dismiss for Lack of Subject Matter Jurisdiction and Lack of
Personal Jurisdiction, Dkt. No. 11, and the Amended Motion. The Court now
addresses the Amended Motion.
Pursuant to Federal Rules of Civil Procedure 55(c) and 60(b), an entry of
default and a default judgment may be set aside only upon the showing of: (1)
mistake, inadvertence, or excusable neglect; (2) newly discovered evidence; (3) fraud,
misrepresentation or other misconduct of the adverse party; (4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; or (6) any other reason
justifying relief from judgment. See also Burrell v. Henderson, 434 F.3d 826 (6th Cir.
2006); United Coin Meter Co. v. Seaboard Coastline R.R., 705 F.2d 839 (6th Cir.
1983). As set forth in United Coin, the Court also must determine that good cause
exists for setting aside default judgment by assessing whether: (a) the plaintiff will be
prejudiced; (c) the defendant has a meritorious defense; and (c) culpable conduct of
the defendant led to the default. Id. at 845; Shepard Claims Serv., Inc. v. William
Darrah & Assocs., 796 F.2d 190, 194 (6th Cir. 1986). The foregoing standards are
applied more stringently under Rule 60(b) than Rule 55(c). Shepard, 796 F.2d at 194.
As the entry of default is a harsh sanction, “[a]ny doubt should be resolved in
favor of the petition to set aside the judgment so that cases may be decided on their
merits. United Coin, 705 F.2d at 846; Shepard, 796 F.2d 193 (there is a strong
preference for deciding cases on the merit rather than by default).
Defendant argues that there is good cause to set aside the entry of default
judgment. Defendant maintains that the default judgment is void because the
Carmack Amendment is not applicable in this case. If the Carmack Amendment does
not apply, the Court would lack subject matter jurisdiction and would have to dismiss
Plaintiff’s cause of action. As the Sixth Circuit stated in Antoine v. Atlas Turner, Inc.,
66 F.3d 105, 108 (6th Cir. 1995) (emphasis added):
If the underlying judgment is void, it is a per se abuse of discretion for
a district court to deny a movant’s motion to vacate the judgment under
Rule 60(b)(4). United States v. Indoor Cultivation Equipment, 55 F.3d
1311, 1317 (7th Cir. 1995). A judgment is void under 60(b)(4) “if the
court that rendered it lacked jurisdiction of the subject matter, or of the
parties, or if it acted in a manner inconsistent with due process of law.”
In re Edwards, 962 F.2d 641, 544 (7th Cir. 1992) (citation omitted).
Defendant contends that this meritorious defense precludes any prejudice to Plaintiff,
particularly as there was no culpable conduct by Defendant. The Court agrees.
It is undisputed that the sole basis for subject matter jurisdiction in this Court
is Plaintiff’s claim for damage to perishable food goods, a claim allegedly rooted in
the Carmack Amendment. The Carmack Amendment states:
(1) MOTOR CARRIERS AND FREIGHT FORWARDERS.
A carrier providing transportation or service subject to jurisdiction
under subchapter I or III of chapter 135 shall issue a receipt or bill
of lading for property it receives for transportation under this part.
That carrier and any other carrier that delivers the property and is
providing transportation or service subject to jurisdiction under
subchapter I or III of chapter 135 or chapter 105 are liable to the
person entitled to recover under the receipt or bill of lading. The
liability imposed under this paragraph is for the actual loss or
injury to the property caused by (A) the receiving carrier, (B) the
delivering carrier, or (C) another carrier over whose line or route
the property is transported in the United States or from a place in
the United States to a place in an adjacent foreign country when
transported under a through bill of lading and, except in the case
of a freight forwarder, applies to property reconsigned or diverted
under a tariff under section 13702.
The Carmack Amendment applies only to transportation subject to motor carrier or
freight forwarder jurisdiction of the Secretary of Transportation or the Surface
Transportation Board. 49 U.S.C. § 13506 addresses “Miscellaneous motor carrier
transportation exemptions.” Section 13506 states, in relevant part (emphasis added):
IN GENERAL.—Neither the Secretary nor the Board has
jurisdiction under this part over—
* * *
transportation by motor vehicle of—
(A) ordinary livestock;
(B) agricultural or horticultural commodities (other than
manufactured products thereof);
(C) commodities listed as exempt in the Commodity List
incorporated in ruling numbered 107, March 19,
1958, Bureau of Motor Carriers, Interstate
Commerce Commission, other than frozen fruits,
frozen berries, frozen vegetables, cocoa beans,
coffee beans, tea, bananas, or hemp, or wool
imported from a foreign country, wool tops and
noils, or wool waste (carded, spun, woven, or
Administrative Ruling 107, now Composite Commodity List Administrative Ruling
119, includes as exempt commodities:
Bagged commodities: Placing exempt commodities in bags does not
effect the exempt status (page 1);
Horticultural commodities. Plants, vegetables, flowers, Exempt – Law
Packaged commodities: Packaging exempt commodities does not affect
their exempt status – Law, (page 21);
Vegetables; Bagged – Exempt – Law (page 26);
Vegetables – Cut up – fresh, in cellophane bags – Exempt – law (page
Vegetables – Washed, fresh, in cellophane bags – Exempt – Law (page
Defendant argues that courts have ruled that produce like the commodity at issue here
is exempt, with such rulings being affirmed by the U.S. Supreme Court. See, e.g.,
Frozen Food Express v. United States, 148 F.Supp. 399, 402-03 (S.D. Tex. 1956)
(“the following commodities . . . [are] exempt: . . . . fresh cutup vegetables in
cellophane bags; fresh vegetables washed, cleaned and packaged in cellophane bags
or boxes; . . . .”), afffirmed 355 U.S. 6 (1957).
Plaintiff argues that exemptions to the Carmack Amendment are to be strictly
construed. Interstate Commerce Commission v. Weldon, 90 F.Supp. 873, 875 (W.D.
Tenn. 1950)(citing Piedmont & Northern R. Co. v. Interstate Commerce Commission,
286 U.S. 299 (1932)). Plaintiff contends that Administrative Ruling 119 does not
include the specific types of salad products on the bill of lading in this case. Plaintiff
suggests that the products at issue are processed salad products, not raw agricultural
commodities in their natural state. Plaintiff states that various people and machines
performed a number of different manufacturing processing steps, removing the
products from the class of “unmanufactured agricultural commodities.” Plaintiff
indicates that the items have been “remov[ed] from the ground, procured . . . from the
ground, removed the stems and such things (similar to removing a peanut from its
shell), washed the products pursuant to the shipper’s processing requirements, and
packaged the same according to applicable product classifications in recycled plastic
containers.” Dkt. No. 14, PgID 237-38.
Plaintiff further argues that the “spring mix” product is not a raw plant, but is
a combination of several types of lettuce, all of which have been processed and mixed
together in particular portions pursuant to manufacturing standards, then packaged for
sale to the general public at a retail store. For those reasons, Plaintiff maintains that
the raw agricultural commodity has been changed into a commercial item that is no
longer exempt from the Carmack Amendment. Citing Weldon, 90 F.Supp. at 876.
Plaintiff also asserts that Defendant did not cite any authority recognizing that the
products at issue in this case are specifically exempt under the Carmack Amendment.
The Court is not persuaded by Plaintiff’s arguments. As Defendant notes,
Frozen Food Express was decided six years after Weldon and a year after the Supreme
Court’s decision in East Texas Motor Freight Lines, Inc. v. Frozen Food Express, 351
U.S. 49 (1956). First, in East Texas, the Supreme Court addressed the language of the
Interstate Commerce Act, specifically Section 203(b)(6) (49 U.S.C. § 303(b)(6)),
insofar as when a commodity has been “manufactured” – rather than simply
processed. The Supreme Court recognized that:
Manufacture implies a change, but every change is not manufacture, and
yet every change in an article is the result of treatment, labor, and
manipulation. But something more is necessary, as set forth and
illustrated in Hartranft v. Wiegmann, 121 U.S. 609, 7 S.Ct. 1240, 30
L.Ed. 1012. There must be a transformation; a new and different article
must emerge, “having a distinctive name, character, or use.”
East Texas, 351 U.S. at 53 (quoting Anheuser-Busch Brewing Ass’n v. United States,
207 U.S. 556, 562 (1908)).
In concluding that a chicken that had been killed and dressed, including
removal of its feathers and entrails so that it was ready for market, the Supreme Court
stated that “this processing which merely makes the chicken marketable [does not]
turn it into a ‘manufactured’ commodity.” East Texas, 351 U.S. at 54 (footnote
omitted). The Supreme Court further explained that:
At some point processing and manufacturing will merge. But where the
commodity retains a substantial identity through the processing stage we
cannot say that it has been ‘manufactured’ within the meaning of [§]
Id. (emphasis added).
Second, in Frozen Food Express, the court explained why frozen fruits and
vegetables were exempt and determined that a wide range of commodities were
exempt, including “fresh cut up vegetables in cellophane bags; fresh vegetables
washed, cleaned and packaged in cellophane bags or boxes:”
Prior to this action by the Court, frozen fruits and vegetables had become
a particular bone of contention in the prolonged struggle over the extent
and scope of the agricultural exemption. There is a heavy volume of
motor carrier traffic in this commodity. The processing to which the
fresh product is subjected, after leaving the farmers’ hands and before
appearing in the familiar frozen-food carton on the grocers’ shelves, is
extensive and complicated. In holding frozen fruits and vegetables to be
exempt, the Home Transfer case has gone far toward settling the entire
controversy in favor of the liberal interpretation of the exemption urged
by the farming interests, the Department of Agriculture, and those motor
carriers (as the Plaintiff) who seek to avoid ICC control in the carriage
of these commodities.
With this background, the following commodities, of agricultural origin,
having undergone some processing but retaining their original identity,
we hold exempt: . . . . fresh vegetables washed, cleaned and packaged in
cellophane bags or boxes; fruits or vegetables (quick frozen); . . .
Frozen Food Express, 148 F.Supp. at 402-03 (noting Home Transfer & Storage Co.
v. United States, 141 F.Supp. 599 (W.D. Wash. 1956), affirmed Interstate Commerce
Commission v. Home Transfer & Storage Co., 352 U.S. 884 (1956)).
For the reasons expressed in East Texas and Frozen Foods Express, the Court
finds that the various types of mixed greens at issue in this case fall within the
definition of exempt commodities in Frozen Food Express and Administrative Ruling
119. It is undisputed that the product at issue was lettuce, some of which was
combined as a “spring mix,” had been washed, cut and packaged in plastic clam
(cellophane) shells. Although the lettuce had been “processed,” the Court cannot find
any basis for determining that it had: (1) been transformed, (2) lost its original
identity, or (3) become a new and different article with a distinctive name, character,
or use, such that the Court could conclude that the lettuce or spring mix had been
The bill of lading documents supplied by Plaintiff undermine its arguments and
reinforce the Court’s conclusion that the commodities at issue are not subject to the
Carmack Amendment. The bill of lading documents specifically identify the products
subject to transport as “exempt commodities.” See Dkt. No. 14, Ex. E at PgID 284,
286 (each document governing the transaction at issue is literally captioned “MOTOR
CARRIER STRAIGHT BILL OF LADING FOR EXEMPT COMMODITIES”).
Because the products at issue are exempt commodities, neither the Secretary of
Transportation nor the Service Transportation Board had jurisdiction over them under
Chapter 135, Subchapter 1, and the Carmack Amendment does not apply to the
products at issue. And, as the Carmack Amendment does not apply, there is no
subject matter jurisdiction in this Court. It is well-established that the lack of subject
matter jurisdiction is a non-waivable, fatal defect, see, e.g., Owen Equipment &
Erection Co. v. Kroger, 437 U.S. 365 (1978) (jurisdiction otherwise lacking cannot
be conferred by consent, collusion, laches, waiver, or estoppel), and dismissal under
Rule 12(b)(1) is required.
The Court holds that the absence of subject matter jurisdiction in this Court
establishes that Plaintiff will not suffer prejudice when default judgment is set aside,
for two reasons: (1) Plaintiff cannot prevail in this Court as the Court does not have
subject matter jurisdiction to hear Plaintiff’s case; and (2) dismissal of this action will
be without prejudice, see, e.g., Brereton v. Bountiful City Corp., 434 F.3d 1213, 1218
(10th Cir. 2006), which means that Plaintiff can re-file its cause of action in an
Finally, the Court is persuaded that the entry of judgment by default is not the
result of culpable conduct by Defendant. First, the time line for responding to
Plaintiff’s Complaint was significantly compromised by the date it was served on
Defendant and Plaintiff’s expediency in defaulting Defendant.
corporation, was served on December 19, 2016, with an answer due on January 9,
2017. The Court notes that there were two federal holidays between those dates
(Christmas and New Year’s).
The Clerk’s entry of default was entered on the first day possible (January 10,
2017), and the notice of that default was served on Defendant on January 12, 2017.
Counsel for Defendant filed a notice of appearance on January 17, 2017, only the
second business day after Defendant received notice of the default. The Court finds
that an appearance of counsel within two business days of being notified of the entry
of default demonstrates that Defendant was serious about defending this action.
The Court also notes that it only took Plaintiff those same two business days to
obtain the default judgment, essentially precluding Defendant from addressing the
Clerk’s entry of default. Defendant filed its Amended Motion only two weeks after
getting notice of the default judgment, approximately six weeks after getting notice
of the lawsuit and only three weeks after learning of the entry of default. Again, the
Court finds that Defendant’s action demonstrates that it was serious about defending
Second, Defendant has represented that it is, in essence, a closely-held business
whose president was distracted by the health condition of, and assisted with the care
for, a terminally ill family member during December 2016 and the majority of January
2017 (the family member died on January 16, 2017), the period between when
Defendant was served until the day before default judgment was entered. Defendant’s
president also states that neither she nor Defendant had been sued before, and she was
unfamiliar with what to do. The Court is satisfied that Defendant’s failure to timely
respond to the Complaint was not the result of culpable conduct by Defendant.
For the reasons set forth above, the Court holds that Defendant has established
that good cause exists for setting aside the Clerk’s entry of default and the judgment
of default. The Court grants Defendant’s motion to set aside the entry of default and
the default judgment and Orders that the Clerk of the Court vacate both the entry of
default and the default judgment. Dkt. Nos. 6 and 10. The Court also finds that,
because the products at issue were exempt commodities under the Carmack
Amendment, the Carmack Amendment does not apply in this case. As sole alleged
basis for the Court’s jurisdiction in this case is the Carmack Amendment, the absence
of a viable claim under the Carmack Amendment deprives the Court of subject matter
jurisdiction. The Court grants Defendant’s motion to dismiss Plaintiff’s cause of
action, without prejudice.
IT IS ORDERED that Defendant’s Amended Motion to Set Aside Default and
Default Judgment, Motion to Dismiss for Lack of Subject Matter Jurisdiction and
Lack of Personal Jurisdiction [Dkt. No. 12] is GRANTED.
IT IS FURTHER ORDERED that the Clerk of the Court shall VACATE the
Clerk’s Entry of Default [Dkt. No. 6] and the Clerk’s Entry of Judgment by Default
[Dkt. No. 10].
IT IS FURTHER ORDERED that Plaintiff’s cause of action is DISMISSED
S/Denise Page Hood
Denise Page Hood
Chief Judge, United States District Court
Dated: April 14, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of record on
April 14, 2017, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
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