FEDERAL INSURANCE COMPANY v. RT&T LOGISTICS, INC. et al
OPINION filed. Signed by Judge Mary L. Cooper on 6/22/2017. (km)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
FEDERAL INSURANCE COMPANY : CIVIL ACTION NO. 16-4241 (MLC)
as subrogee of PMC GLOBAL, INC., :
RT&T LOGISTICS, INC. and
S AT I LLC,
COOPER, District Judge
Federal Insurance Company as subrogee of PMC Global, Inc. (“Plaintiff”) brought
this action against RT&T Logistics, Inc. (“RT&T”) and S AT I LLC (“S AT,” and
together with RT&T, “Defendants”) for, inter alia, breach of contract after S AT
allegedly damaged cargo it was transporting. (Dkt. 1 at 3–4.)1 S AT failed to timely
respond to the Complaint, and Plaintiff requested entry of default. (Dkt. 13.) The Clerk
of the Court entered default in favor of the Plaintiff in accordance with Fed. R. Civ. P.
55(a). (See entry following dkt. 13.) Plaintiff has now moved for default judgment
against S AT in the amount of $370,350.00, plus prejudgment interest. (Dkt. 14-2.) We
have reviewed the submissions made in support of the motion, and decide the motion
without oral argument. See L. Civ. R. 78.1(b). For the reasons below, we will deny
without prejudice Plaintiff’s motion for default judgment.
The Court will cite documents filed on the Electronic Case Filing System (“ECF”) by
referring to the docket entry numbers as “dkt.” Pincites reference ECF pagination.
“Once a party has defaulted, the consequence is that the factual allegations of the
complaint, except those relating to the amount of damages, will be taken as true.”
Teamsters Pension Fund of Phila. & Vicinity v. Am. Helper, Inc., No. 11-624, 2011 WL
4729023, at *2 (D.N.J. Oct. 5, 2011) (quoting DIRECTV, Inc. v. Pepe, 431 F.3d 162, 165
n. 6 (3d Cir. 2005)). “The entry of a default judgment is largely a matter of judicial
discretion, although the Third Circuit has emphasized that such ‘discretion is not without
limits, however, and [has] repeatedly state[d] [its] preference that cases be disposed of on
the merits whenever practicable.’” Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532,
535 (D.N.J. 2008) (quoting Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984)).
Prior to entering default judgment, the court must: “(1) determine it has
jurisdiction both over the subject matter and parties; (2) determine whether defendants
have been properly served; (3) analyze the complaint to determine whether it sufficiently
pleads a cause of action; and (4) determine whether the plaintiff has proved damages.”
Moroccanoil, Inc. v. JMG Freight Grp. LLC, No. 14-5608, 2015 WL 6673839, at *1
(D.N.J. Oct. 30, 2015). Additionally, the Court must consider the following three factors:
“(1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears to
have a litigable defense, and (3) whether defendant’s delay is due to culpable conduct.”
Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000); see also Nationwide Mut.
Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 F. App’x 519, 522 (3d Cir. 2006).
We conclude that default judgment is inappropriate at this time because Defendant
RT&T is actively litigating this case and Plaintiff’s claims against the two Defendants are
intertwined. As we have previously explained, “[w]here the motion for default judgment
is made as to only one defendant in a multi-defendant case, ‘the preferred practice is for
the court to withhold granting default judgment until the action is resolved on its merits
against non-defaulting defendants: if plaintiff loses on [the] merits, the complaint should
then be dismissed against both defaulting and non-defaulting defendants.’” Alpine Fresh,
Inc. v. Jala Trucking Corp., 181 F. Supp. 3d 250, 257–58 (D.N.J. 2016) (quoting Animal
Sci. Products, Inc. v. China Nat. Metals & Minerals Imp. & Exp. Corp., 596 F.Supp.2d
842, 849 (D.N.J. 2008)); see also Charles A. Wright et. al., 10A Fed. Prac. & Proc. Civ.
§ 2690 (3d ed. 2015) (“judgment should not be entered against that defendant until the
matter has been adjudicated with regard to all defendants, or all defendants have
Denying default judgment at this time is in line with the Third Circuit’s stated
preference that cases be disposed of on the merits. Chanel, 558 F. Supp. 2d at 535. It is
also particularly appropriate here where the Defendants may be jointly or severally liable
for the damages sought. The claims in the Complaint were brought against both RT&T
and S AT. Should the claims against RT&T fail on their merits, we would be faced with
the risk of inconsistent judgments if we granted default judgment against S AT. See, e.g.,
Farzetta v. Turner & Newall, Ltd., 797 F.2d 151, 154 (3d Cir. 1986). The risk of
inconsistent judgments is only compounded where, as here, RT&T has cross-claimed
against S AT for contribution and indemnification. (Dkt. 6 at 8–9.) See Alpine Fresh,
181 F. Supp. 3d at 258 (declining to grant default judgment and noting pending crossclaims between defendants).
Before imposing the “extreme sanction” of default judgment, we would also need
to undertake an inquiry into whether the party subject to default has a meritorious
defense. Teamsters Pension Fund of Phila., 2011 WL 4729023, at *4. In light of
RT&T’s active litigation of this case, we need not address now the merits of various
defenses that may exist, including those raised by RT&T as affirmative defenses. (Dkt. 6
at 7.) For the same reason, we need not evaluate other issues that appear on the face of
the Complaint, such as whether some or all of the Plaintiff’s claims are preempted by the
Carmack Amendment, 49 U.S.C. § 14706, or other laws. See, e.g., Ameriswiss Tech.,
LLC v. Midway Line of Illinois, Inc., 888 F. Supp. 2d 197, 204–08 (D.N.H. 2012)
(holding that certain state law claims were preempted by Carmack Amendment and
Interstate Commerce Commission Termination Act).
Although we decline to grant default judgment against S AT for the reasons above,
we also note that Plaintiff’s motion for default judgment appears to be deficient for lack
of proper service. “Before the Court can enter default judgment, it must find that process
was properly served on the Defendant[s].” Teamsters Pension Fund of Phila., 2011 WL
4729023, at *2. Corporations may be served “by delivering a copy of the summons and
of the complaint to an officer, a managing or general agent, or any other agent authorized
by appointment or by law to receive service of process.” Fed. R. Civ. P. 4(h)(1)(B).
Mailing a copy of the Complaint via certified mail or delivering a copy of the Complaint
to an unidentified representative of the company is insufficient service under Rule 4 of
the Federal Rules of Civil Procedure. See Taveras v. Resorts Int’l Hotel, Inc., No. 074555, 2008 WL 577291, at *1 (D.N.J. Feb. 29, 2008). The Affidavit of Service
submitted in this case does not identify whether the Complaint was served on agent
authorized to receive service of process. (Dkt. 14-5.) Accordingly, it is not clear whether
Defendant S AT has been properly served as required for us to enter default judgment.2
We also note that the Complaint does not adequately allege diversity subject matter
jurisdiction under 28 U.S.C. § 1332(a). Under that statute, “the party asserting jurisdiction must
show that there is complete diversity of citizenship among the parties” as well as an amount in
controversy that exceeds the statutory threshold. Schneller v. Crozer Chester Med. Ctr., 387 Fed.
App’x 289, 292 (3d Cir. 2010). The Complaint states that Plaintiff Federal Insurance Company
is an Indiana corporation whose principal place of business is in Pennsylvania. (Dkt. 1 at 1.)
With regard to Defendants, however, the Complaint alleges only that Defendant RT&T is a
foreign corporation with a principal place of business in Iowa and that Defendant S AT is a
foreign corporation with a principal place of business in Wisconsin. (Id. at 2.) (RT&T’s Answer
inexplicably declined to provide information on its state of incorporation or principal place of
business. (Dkt. 6 at 1.)) This is insufficient information to determine whether diversity
jurisdiction exists. A corporation is a citizen both of the state where it is incorporated and of the
state where it has its principal place of business. Zambelli Fireworks Mfg. Co. v. Wood, 592
F.3d 412, 419 (3d Cir. 2010). The citizenship of LLCs for diversity purposes is determined by
the citizenship of each of its members. Id. at 418. Because the Complaint does not contain any
allegations related to the members of S AT, which appears to be an LLC, we cannot determine
whether we have the complete diversity of citizenship required for jurisdiction under § 1332(a).
We do note, however, that we have subject matter jurisdiction over this case under 49
U.S.C. § 14706 and 28 U.S.C. § 1367. Count four of the Plaintiff’s Complaint is a claim under
the Carmack Amendment. (Dkt. 1 at 8.) The Carmack Amendment provides for liability of
common carriers for damage to or loss of goods during shipment. S & H Hardware & Supply
Co. v. Yellow Transp., Inc., 432 F.3d 550, 554 (3d Cir. 2005). District courts have jurisdiction
to hear civil actions brought under the Carmack Amendment so long as the amount in
controversy exceeds $10,000. See Mrs. Ressler’s Food Prod. v. KZY Logistics LLC, No. 162173, 2017 WL 167464, at *1 (3d Cir. Jan. 17, 2017). see also 28 U.S.C. 1337(a); 49 U.S.C. §
14706(d)(3). We conclude that we have jurisdiction to hear Plaintiff’s Carmack Amendment
claim, and the Complaint satisfies the amount in controversy requirement for such claims under
28 U.S. § 1337(a). We exercise supplemental jurisdiction over the other claims in the Complaint
because they arise from a common set of facts and accordingly “form part of the same case or
controversy.” See 28 U.S.C. § 1367; see also Intercargo Ins. Co. v. Burlington N. Santa Fe R.R.,
185 F. Supp. 2d 1103, 1110 (C.D. Cal. 2001) (extending supplemental jurisdiction to claims
related to Carmack Amendment claim).
For the reasons stated above, we will deny without prejudice Plaintiff’s motion for
default judgment and issue an appropriate Order.
s/ Mary L. Cooper
MARY L. COOPER
United States District Judge
Dated: June 22, 2017
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