Infinity Air, Inc. v. Echo Global Logistics, Inc. et al

Filing 21

OPINION AND ORDER: For the foregoing reasons, Echos motion to dismiss or transfer 9 is GRANTED IN PART. This case is transferred to the United States District Court for the Northern District of Illinois. In addition, Echos motion to strike Infinitys unauthorized sur-reply 16 is GRANTED based on Infinitys failure to comply with Local Rule 7-1(e)(3). Signed on 6/20/13 by Judge Michael W. Mosman. (dls)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

INFINITY AIR, INC.,
No. 3:13-cv-00307-MO
Plaintiff,
OPINION AND ORDER
v.
ECHO GLOBAL LOGISTICS, INC., and
GIZMO TRUCKING LLC,
Defendants.
MOSMAN, J.,
Defendant Echo Global Logistics, Inc. (“Echo”) has filed a motion to dismiss or transfer
[9] under Federal Rule of Civil Procedure 12(b)(3). The key issue before me is whether the
Carmack Amendment to the Interstate Commerce Act applies to Echo and thus prohibits the
enforcement of a forum selection clause in a contract between the parties. Based on my finding
that the Carmack Amendment does not apply to Echo, I GRANT IN PART Echo’s motion to
dismiss or transfer.

1 – OPINION AND ORDER

FACTS
Echo is an Illinois-based corporation that acts as a third party broker for its customers to
negotiate and secure agreements with carriers or shippers for the pick-up and delivery of freight
or cargo throughout the United States. (Leckow Decl. [11] ¶ 3.) The pick-up and shipment of a
customer’s goods are undertaken by the freight haulers that Echo retains on behalf of its
customers. (Id. [11].) Echo, however, is not involved in the physical pick-up, shipping, or
delivery of the customer’s goods. (Id. [11].)
Echo requires its customers to execute an Application for Credit that sets forth the
general terms and conditions applicable to Echo’s services. (Id. [11] ¶ 4.) This application
includes two relevant provisions. First, it provides that the terms and conditions described on
Echo’s website are incorporated into the application: “. . . I/we expressly agree that the additional
terms and conditions listed at www.echo.com/tc are expressly incorporated into this Agreement.”
(Id. [11] Ex. 1). The terms and conditions on Echo’s website, in turn, include the following
forum selection clause:
Forum Selection and Choice of Law—Any claim, dispute or litigation relating to
these Terms and Conditions, any shipment scheduled or tendered hereunder or
through ECHO’s website, or relating to any and all disputes between ECHO and
the enrolled Customer, Shipper and/or Consignee and/or Brokers for any enrolled
Customer, Shipper and/or Consignee, shall be filed in the District Court of Cook
County, Illinois or in the United States District Court for the Northern District of
Illinois in Chicago and shall be subject to Illinois law.
(Id. [11] Ex. 2.) Second, the application includes an additional forum selection clause: “I/We
agree that all disputes with Echo will be subject to jurisdiction and resolution in Chicago, IL.”
(Id. [11] Ex. 1.)
On September 8, 2008, plaintiff Infinity Air, Inc. (“Infinity”) executed Echo’s credit
application (the “Agreement”). (Leckow Decl. [11] Ex. 1.) Pursuant to that agreement, Echo

2 – OPINION AND ORDER

retained the services of defendant Gizmo Trucking LLC (“Gizmo”) to ship an aircraft spare part
from New Mexico to Washington for Infinity. (Compl. [1] ¶¶ 6, 8.) Infinity claims the part was
damaged in route and asserts a single claim for relief under the Carmack Amendment against
both Echo and Gizmo. (Id. [1] ¶¶ 10–11.)
LEGAL STANDARD
“A motion to enforce a forum selection clause is treated as a motion to dismiss pursuant
to Rule 12(b)(3).” Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009). Under Rule 12(b)(3),
pleadings need not be accepted as true, and facts outside the pleadings may be considered.
Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996).
ANALYSIS
Echo argues that by filing its complaint in this Court, Infinity has ignored the
Agreement’s two forum selection clauses, which purportedly require that all disputes be resolved
in Chicago, Illinois. (Mem. [10] at 2.) In response, Infinity contends that the Carmack
Amendment prohibits the enforcement of forum selection clauses in cases like this one. (Resp.
[12] at 1.) I agree with Echo: the Carmack Amendment does not apply to Echo, and the
Agreement between the parties requires that this case be transferred to the United States District
Court for the Northern District of Illinois.
I.

Carmack Amendment
The Carmack Amendment is a part of the Interstate Commerce Act, which “provides the

exclusive cause of action for interstate shipping contract claims.” White v. Mayflower Transit,
LLC, 543 F.3d 581, 584 (9th Cir. 2008). Infinity asserts a claim under 49 U.S.C. § 14706(a)(1),
which provides as follows:
A carrier providing transportation or service . . . shall issue a receipt or bill of
lading for property it receives for transportation under this part. That carrier and
3 – OPINION AND ORDER

any other carrier that delivers the property and is providing transportation or
service . . . are liable to the person entitled to recover under the receipt or bill of
lading.
(emphasis added). According to Infinity, Echo is a carrier “providing transportation or services”
such that its potential liability falls within § 14706(a)(1). Consequently, venue should be
determined by the Carmack Amendment’s venue provision, which provides as follows:
Civil Actions.—
(1) Against delivering carrier.— A civil action under this section may be brought
against a delivering carrier in a district court of the United States or in a State
court. Trial, if the action is brought in a district court of the United States is in a
judicial district, and if in a State court, is in a State through which the defendant
carrier operates.
(2) Against carrier responsible for loss.—A civil action under this section may be
brought against the carrier alleged to have caused the loss or damage, in the
judicial district in which such loss or damage is alleged to have occurred.
Id. § 14706(d) (emphasis added). Therefore, because defendants operate in Oregon, Infinity
claims that venue is proper under § 14706(d)(2). (Compl. [1] ¶ 2.)
Furthermore, as Infinity correctly points out, one of the “inalienable requirements” of the
Carmack Amendment “is that the shipper be permitted to sue in certain venues when a dispute
arises.” Smallwood v. Allied Van Lines, Inc., 660 F.3d 1115, 1121 (9th Cir. 2011). Therefore,
where § 14706 applies, it prohibits enforcement of forum selection clauses.
The problem for Infinity here is that Echo cannot be held liable under § 14706. As the
language emphasized above makes clear, § 14706 imposes liability on a carrier for all losses
relating to goods it transports in interstate commerce. It imposes no liability on brokers, and
brokers and carriers are distinct under the Act. A “broker” is defined as “a person, other than a
motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers
for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling,

4 – OPINION AND ORDER

providing, or arranging for, transportation by a motor carrier for compensation.” 49 U.S.C. §
13102(2). In contrast, a “motor carrier” is defined as “a person providing motor vehicle
transportation for compensation.” Id. § 13102(14). Applying these definitions to the facts at
hand, Echo is a broker. Rather than actually providing motor vehicle transportation for
compensation, Echo arranges for transportation by motor carriers for compensation. 1 Therefore,
the Carmack Amendment does not apply to Echo and, as a result, cannot prohibit enforcement of
the Agreement’s forum selection clauses.
II.

Forum Selection Clauses
Without interference from the Carmack Amendment, I now take up the Agreement’s

forum selection clauses. In the Ninth Circuit, the enforceability of a forum selection clause is a
matter of federal procedural law. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513
(9th Cir. 1988). “Moreover, because enforcement of a forum selection clause necessarily entails
interpretation of the clause before it can be enforced, federal law also applies to the interpretation
of forum selection clauses.” Id.
In The Bremen v. Zapata Off-Shore Co., the Supreme Court, sitting in admiralty, held that
forum selection clauses are prima facie valid and should not be set aside unless the party
challenging their enforcement can show they are “‘unreasonable’ under the circumstances.” 407
U.S. 1, 10 (1972). The Supreme Court and Ninth Circuit have construed this exception narrowly:

1

The definition of “transportation” does not alter my analysis. Section 13102(23)(B) states that
“transportation” includes “services related to [the] movement [of passengers or property], including arranging for,
receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, handling, packing, unpacking, and
interchange of passengers and property.” If the definition of “motor carrier” incorporated the definition of
“transportation” and extended to any person “arranging for [the movement of] . . . property,” brokers would cease to
exist under the Act. I decline to read the definition of “motor carrier” in a way that renders the definition of “broker”
meaningless. Applying the canon of statutory construction noscitur a sociis, I interpret the general term “arranging
for” to be similar to the other specific terms in the series, which all relate to the conduct of the actual transporter.
Because Echo did not “arrange for” the movement of property in this more limited sense, it is a broker rather than a
motor carrier under the Act.

5 – OPINION AND ORDER

A forum selection clause is unreasonable if (1) its incorporation into the contract
was the result of fraud, undue influence, or overweening bargaining power; (2)
the selected forum is so “gravely difficult and inconvenient” that the complaining
party will “for all practical purposes be deprived of its day in court,” or (3)
enforcement of the clause would contravene a strong public policy of the forum in
which the suit is brought.
Argueta, 87 F.3d at 325 (citations omitted). This is clearly the appropriate standard for admiralty
cases.
In Stewart Organization, Inc. v. Ricoh Corp., the Supreme Court addressed the question
of whether to apply The Bremen in diversity cases. 487 U.S. 22 (1988). The Court disagreed with
“the [lower] court’s articulation of the relevant inquiry as ‘whether the forum selection clause in
this case is unenforceable under the standards set forth in The Bremen.’” Id. at 28. Instead, the
Supreme Court held that a federal court sitting in diversity should treat a request to enforce a
forum selection clause as a motion to transfer venue under 28 U.S.C. § 1404(a). Therefore,
although “[t]he presence of a forum-selection clause . . . will be a significant factor that figures
centrally in the district court’s calculus,” under § 1404(a), the district court must “weigh in the
balance a number of [other] case-specific factors.” Id. at 29.
Wright and Miller maintain that
The combined rule of these cases is that a federal court sitting in admiralty
jurisdiction should apply a forum selection clause if it is “reasonable,” but a
federal court sitting in diversity or federal question jurisdiction should take the
clause into account only as one element in the balancing test required by Section
1404(a).
14D Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 3803.1 (3d ed. 2013). In my view, this would be the proper approach. Wright and
Miller note, however, that “many lower federal courts have failed to distinguish between the
approach taken in [The Bremen and its progeny] and that taken in Stewart.” Id.

6 – OPINION AND ORDER

Although the Ninth Circuit has not fully discussed this issue, it falls in the camp that has
chosen to apply the standard articulated in The Bremen even to non-admiralty cases. See Doe 1,
87 F.3d at 325; Argueta, 87 F.3d at 325; Spradlin v. Lear Siegler Mgmt. Servs. Co., 926 F.2d
865, 867 (9th Cir. 1991); Manetti-Farrow, 858 F.2d at 513; Pelleport Investors, Inc. v. Budco
Quality Theatres, Inc., 741 F.2d 273, 280 (9th Cir. 1984). I therefore analyze the Agreement’s
forum selection clauses under The Bremen. 2
Infinity does not allege (1) that the forum selection clauses were incorporated into the
Agreement through fraud, undue influence, or overweening bargaining power; (2) that the
Northern District of Illinois is so “gravely difficult and inconvenient” that transfer would deprive
Infinity of its day in court; or (3) that enforcement would contravene a strong public policy of the
State of Oregon. Instead, Infinity argues that the forum selection clauses apply only to litigation
related to credit and payment issues. Accordingly, because this is not a credit dispute, the forum
selection clauses in the Agreement are irrelevant. This argument is based primarily on the fact
that the Agreement is styled as an Application for Credit. (Resp. [12] at 9–13.)
I disagree. Under the federal common law of contracts,
A written contract must be read as a whole and every part interpreted with
reference to the whole, with preference given to reasonable interpretations.
Contract terms are to be given their ordinary meaning, and when the terms of a
contract are clear, the intent of the parties must be ascertained from the contract
itself. Whenever possible, the plain language of the contract should be considered
first. The fact that the parties dispute a contract’s meaning does not establish that
the contract is ambiguous; it is only ambiguous if reasonable people could find its
terms susceptible to more than one interpretation.
Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th Cir. 1999)
(citations omitted). Giving the language of the forum selection clauses their ordinary meaning,
the intent of the parties is clear. The document itself states that “all disputes with Echo will be
2

In any event, the result in this case would likely be the same under § 1404(a).

7 – OPINION AND ORDER

subject to jurisdiction and resolution in Chicago, IL.” (Leckow Decl. [11] Ex. 1) (emphasis
added). Even were this clause, standing alone, ambiguous, the forum selection clause from
Echo’s website, which is expressly incorporate into the Agreement, would remove any
ambiguity. It states that
Any claim, dispute or litigation relating to . . . any shipment scheduled or tendered
hereunder . . . , or relating to any and all disputes between ECHO and the enrolled
Customer, Shipper and/or Consignee and/or Brokers for any enrolled Customer,
Shipper and/or Consignee, shall be filed in [Chicago, Illinois] and shall be subject
to Illinois law.
(Id. [11] Ex. 2.) This clause is not limited to credit disputes. It specifically covers all claims
relating to shipments and all disputes between Echo, customers, shippers, consignees, and
brokers. Therefore, based on the clear terms of the Agreement and the absence of even alleged
facts that would render the forum selection clauses unreasonable under The Bremen, I find that
the Agreement’s forum selection clauses are enforceable. 3
CONCLUSION
For the foregoing reasons, Echo’s motion to dismiss or transfer [9] is GRANTED IN
PART. This case is transferred to the United States District Court for the Northern District of
Illinois. In addition, Echo’s motion to strike Infinity’s unauthorized sur-reply [16] is GRANTED
based on Infinity’s failure to comply with Local Rule 7-1(e)(3).
IT IS SO ORDERED.
DATED this

20th

day of June, 2013.

/s/ Michael W. Mosman
MICHAEL W. MOSMAN
United States District Judge
3

Neither Echo nor Infinity has addressed the relevance of Gizmo to my analysis here, and Gizmo has not
yet appeared in this action.

8 – OPINION AND ORDER