Certain Underwriters at Interest at Lloyd's of London, Plaintiff,
United Parcel Service of America, Inc., Defendant.
MEMORANDUM RE: DEFENDANT’S MOTION TO DISMISS
MICHAEL M. BAYLSON, U.S.D.J.
Plaintiffs (“Underwriters”) are a collection of individuals and entities who contribute to an insurance policy that provided property liability insurance to First State Depository, LLC (“First State”). First State is a Delaware company that is in the business of providing coin and special metals services, including custody, shipping, and accounting to both individual and commercial entities. Defendant, United Postal Service (“UPS”), is a Georgia corporation in the business of delivering packages and providing specialized transportation and logistics services.
Plaintiffs allege that UPS contracted with First State to deliver 27 packages containing specialty gold and silver coins on various dates from February 2, 2013 to March 28, 2013, but that these packages were never delivered to the intended recipients. Plaintiffs allege that UPS picked up the packages from First State’s Wilmington facility, subsequently scanned them at an intermediate UPS facility, and sometime thereafter lost and/or stole the packages before they were delivered to the intended recipient. After investigating First State’s losses and as a result of insurance payments made to First State, Plaintiffs acquired all of First State’s rights against UPS or any other culpable third party regarding the lost packages.
II. PROCEDURAL HISTORY
This Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332 because the parties are citizens of different states and the amount in controversy exceeds $75, 000.
Plaintiffs filed a Complaint on February 28, 2013, alleging state law claims of breach of contract, negligence, negligent supervision, and fraudulent conversion for each of the lost packages. ECF 1. Specifically, for each lost package, Plaintiffs alleged that Defendant breached its contract with First State by failing to successfully deliver the subject packages under the terms of the shipping agreement. Id. Moreover, for each lost package, Plaintiffs alleged that Defendant was negligent in failing to use the ordinary care of a reasonably prudent package delivery company in both ensuring safe delivery of packages and in selecting and training its employees to safely deliver packages. Id.
Plaintiffs argued in the alternative that each lost package was fraudulently converted by UPS or its employees. Id.
On March 27, 2013, UPS filed a Motion to Dismiss Plaintiffs’ Complaint arguing that all of Plaintiffs’ claims were preempted by the Carmack Amendment. ECF 4. On April 10, 2013, Plaintiffs responded to UPS’s Motion to Dismiss by arguing that their fraudulent conversion claims constituted an exception to Carmack preemption. ECF 6. In response, UPS filed a Reply Memorandum on April 17, 2013, arguing that Plaintiffs had not alleged sufficient facts to support their causes of action under Federal Rules of Civil Procedure 12(b)(6) and 9(b), and that Plaintiffs had used facts and allegations not present in the Complaint to refute UPS’s Motion to Dismiss. ECF 7.
In light of the above filings, this Court entered an Order dated May 8, 2013, holding that Plaintiffs’ fraudulent conversion claims were not pled with sufficient particularity to meet Rule 9(b)’s heightened pleading standard for claims sounding in fraud. ECF 8. As a result, this Court permitted Plaintiffs to amend their Complaint.
On May 29, 2013, Plaintiffs filed an Amended Complaint. ECF 9. The Amended Complaint contained allegations about four additional lost packages. Id. The Amended Complaint also asserted additional facts regarding an alleged pattern of unlawful conversions and UPS’s refusal to assist in investigating the lost packages. Id. In response, UPS filed a Motion to Dismiss Plaintiffs’ Amended Complaint on June 12, 2013, arguing again that the Carmack Amendment preempted the claims, and also that Plaintiffs had failed to allege sufficient facts to satisfy Rules 12(b)(6) and Rule 9(b). ECF 10. On June 26, 2013, Plaintiffs responded to UPS’s Motion to Dismiss Plaintiffs’ Amended Complaint claiming that they had alleged sufficient facts to satisfy their pleading requirements, and that they established a “true conversion” in order to circumvent Carmack preemption of their state law claims. ECF 11. UPS filed a Reply Memorandum on July 3, 2013, denying that Plaintiffs established a true conversion. ECF 12.
III. THE PARTIES’ ARGUMENTS
This cases raises three issues, each of which the parties dispute. Those ...