Case Title: Hairston Motor Company v. Newsome

Citation: 

Docket Number: 960664

State: virginia

Court: Virginia Supreme Court

Date: 1997-01-10T00:00:00Z

Document:
Present:  All the Justices 
 
HAIRSTON MOTOR COMPANY 
 
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR. 
v. Record No.  960664               JANUARY 10, 1997 
 
WILLIAM E. NEWSOME, JR., 
 T/A EDCO, ET AL. 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF DANVILLE 
 
James F. Ingram, Judge 
 
 
 
In this appeal, we consider the application of the provision 
in federal law governing the liability of common carriers arising 
under receipts or bills of lading, commonly known as the Carmack 
Amendment, formerly 49 U.S.C. § 11707, to the determination of 
proper venue for an action filed in state court.
1  Finding that 
federal law provided the exclusive remedy for the loss alleged, 
the trial court construed the venue provisions within the Carmack 
Amendment to require dismissal of the action for lack of proper 
venue within Virginia.  For the following reasons, we will 
reverse the judgment of the trial court and remand the case for 
further proceedings. 
 
I. BACKGROUND 
 
In raising an objection to venue, the burden rests with the 
defendants to show that venue is improperly laid.  Texaco, Inc. 
v. Oaks, 214 Va. 676, 677-78, 204 S.E.2d 250, 251 (1974); Hodgson 
v. Doe, 203 Va. 938, 942, 128 S.E.2d 444, 446 (1962).  Here, 
because the defendants have offered no evidence contradicting the 
                     
     
1A general revision of the Interstate Commerce Act took 
effect January 1, 1996.  See P.L. 104-88, Title I, § 102(a), 109 
Stat. 804 (1995).  Liability under bills of lading is now 
controlled by 49 U.S.C. § 14706. 
factual allegations in the motion for judgment, we will accept 
those allegations as true for purposes of resolving the issue 
presented on appeal. 
 
Hairston Motor Company (Hairston) operates a Volvo 
automobile dealership in Danville.  Beginning in 1992, Volvo 
International began auctioning program and demonstrator vehicles 
to its dealers.  Hairston regularly attended these auctions in 
Manheim, Pennsylvania, purchasing vehicles and contracting with 
Flynn Transport, Inc. (Flynn), which is based in Towanda, 
Pennsylvania, to transport the vehicles from Manheim to Danville. 
 
On July 22, 1993, Hairston purchased 18 vehicles at an 
automobile auction in Manheim.  It contracted with Flynn to 
deliver the vehicles to Danville.  Flynn then engaged the 
services of William E. Newsome, Jr., trading as EDCO (Newsome), a 
resident of Fredericksburg, to deliver nine of the vehicles under 
Flynn's contract with Hairston.
2  Newsome maintained a cargo 
insurance policy with Northland Insurance Company (Northland).  
Northland has a registered agent for service of process in 
Richmond. 
 
While en route to Danville, Newsome was involved in a single 
vehicle accident in which three of the vehicles he was 
transporting were damaged.  Newsome delivered the undamaged 
vehicles to Hairston and turned the damaged vehicles over to 
                     
     
2Flynn denied in its answer, and continues to deny on 
appeal, the allegation that Newsome was acting as its agent 
rather than as an independent contractor directly responsible to 
Hairston.  Because the proceedings in the trial court did not 
reach the factual merits of this claim, we express no opinion on 
this issue. 
Northland for adjustment.  Northland later sold two of the 
vehicles and has not paid any claim on the vehicles.  One sale 
was made in Chesapeake, Virginia. 
 
On July 14, 1994, Hairston filed a motion for judgment 
against Flynn, Newsome, and Northland (collectively, the 
defendants), alleging that Flynn and Newsome had breached their 
contracts by failing to deliver the three vehicles, and that 
Northland had unlawfully converted the vehicles by selling two of 
them without Hairston's consent. 
 
The defendants filed numerous responsive pleadings including 
substantially similar pleadings styled "OBJECTION TO VENUE AND 
MOTION TO TRANSFER."  The defendants asserted that Hairston's 
claims under state common law were preempted by application of 
the Interstate Commerce Act (the Act), which provides the 
exclusive remedy for liabilities incurred as a result of a common 
carrier providing transportation or service subject to the 
jurisdiction of the Interstate Commerce Commission.  The 
defendants further asserted that the provisions of the Carmack 
Amendment of the Act required that the suit be brought "in the 
judicial district in which such loss or damage is alleged to have 
occurred," superseding the state venue statutes.  Identifying the 
physical damage to the vehicles resulting from Newsome's accident 
as the "loss or damage" upon which liability was predicated, the 
defendants averred that venue would lie in Pennsylvania.
3
                     
     
3Although there is some factual dispute over the precise 
location of the accident, the record supports the conclusion, and 
for purposes of our analysis we will assume, that the accident 
occurred in Pennsylvania. 
 
In the alternative, the defendants asserted that, even if 
the provisions of the Carmack Amendment did not supersede state 
venue statutes, Pennsylvania was nonetheless a more convenient 
forum for the litigation.  In various other motions, the 
defendants demurred to the claims of the suit and sought 
dismissal on various grounds including res judicata, citing a 
prior federal suit arising out of the same factual circumstances. 
 
After receiving briefs and hearing oral argument from the 
parties, the trial court dismissed the suit for lack of venue.  
Specifically, the trial court held "that the Carmack Amendment 
. . . is the applicable law governing this matter and . . . that 
the City of Danville is not a proper location for the trial of 
this matter under the provisions of Title 49, United States Code, 
Section 11707(d)(2)(A)(iii)."  The final order made no provision 
for transfer of the proceeding.  While noting that the "matter 
came on to be heard upon Defendants' Demur[rer]s and numerous 
Motions to Dismiss,"  the trial court did not address any issue 
other than the objection to venue based on the Carmack Amendment. 
 We awarded Hairston this appeal, limited to the venue issues. 
 
I.  SCOPE OF FEDERAL PREEMPTION 
 
Resolution of the venue issues upon which an appeal has been 
awarded in this case requires consideration of two questions: (1) 
whether federal law in fact controls the merits of the claims, 
and, if so, (2) whether the venue provisions of the applicable 
federal law compel dismissal here.   
 
A.  Preemption of Claims Against Common Carriers  
 
Exercising its authority under the Commerce Clause, Article 
I, Section 8, Clause 3 of the United States Constitution, the 
federal government has retained for itself the power to regulate 
and supervise the activities of common carriers operating across 
state lines.  The principal medium for enforcing this authority 
has been the Interstate Commerce Act.  In 1906, legislation which 
has become known as the Carmack Amendment included in the Act 
provisions for liability of common carriers arising under 
receipts or bills of lading. 
 
Although the carrier is not an insurer under the Carmack 
Amendment, the shipper "need only prove, in essence, that the 
goods were received by the carrier at the point of origin but 
were delivered at the destination in a damaged condition or with 
a portion or all of the goods missing.  The liability [of the 
carrier] arises under a theory similar to res ipsa loquitur."  
United States v. Seaboard Coastline Railroad, 384 F.Supp. 1103, 
1106-07 (E.D. Va. 1974)(citation omitted) (emphasis added). 
 
In Adams Express Company v. Croninger, 226 U.S. 491 (1913), 
the United States Supreme Court determined that the Carmack 
Amendment superseded all state regulation with respect to claims 
arising out of such liability.  Id. at 505-06; see also Manieri 
v. Seaboard Air Line Railway Co., 147 Va. 415, 420, 137 S.E. 496, 
498 (1927).   
 
Since state courts have concurrent jurisdiction over claims 
controlled by the Carmack Amendment, see Missouri, Kansas & Texas 
Ry. v. Harris, 234 U.S. 412, 421 (1914), a case against common 
carriers asserting liability for loss or damage may properly be 
heard in the Virginia circuit court on the merits, applying 
federal law.  
 
B.  The Claim Against Northland Insurance 
 
The motion for judgment alleges that Northland received 
damaged vehicles from Newsome "to either repair or to pay 
Hairston Motor Company for them."  It further alleges that 
Northland did not repair or pay for the vehicles, but sold two of 
the vehicles.  One of the sales allegedly occurred in Virginia.  
Based upon these allegations, Hairston asserted a claim for 
common law conversion against Northland.  Nevertheless, Northland 
has asserted that the Carmack Amendment precludes claims against 
an interstate carrier's insurance company in these circumstances. 
 We disagree. 
 
By its express terms, the Carmack Amendment applies only to 
the liability of a "common carrier" under a "receipt or bill of 
lading."  49 U.S.C. § 11707(a)(1)(now 49 U.S.C. § 14706(a)(1)).  
Northland is not a common carrier, see former 49 U.S.C. 
§ 10102(4); see also 49 U.S.C. § 13102(12), nor is Hairston's 
action for conversion of property premised on a receipt or bill 
of lading.   
 
An allegation of the tort of conversion asserts a "wrongful 
exercise or assumption of authority . . . over another's goods, 
depriving him of their possession; [and any] act of dominion 
wrongfully exerted over property in denial of the owner's right, 
or inconsistent with it."  Universal C.I.T. Credit Corp. v. 
Kaplan, 198 Va. 67, 75, 92 S.E.2d 359, 365 (1956).  While 
Northland may have initially acquired possession of the vehicles 
from its insured during the course of an interstate shipment, 
Hairston's common law claim for conversion does not arise from 
the transportation or damage of the property, or even under the 
contract of insurance between Newsome and Northland.  Common law 
claims not superseded by the Carmack Amendment are preserved 
under the Act.  See former 49 U.S.C. § 10103.  Common law claims 
not premised on transportation or damage by carriers and not 
arising from a receipt or bill of lading are preserved under the 
Act.  See Sokhos v. Mayflower Transit, Inc., 691 F. Supp. 1578, 
1581-82 (D. Mass. 1988).  Accordingly, we hold that the trial 
court's determination that the claim against Northland is 
preempted by federal law was in error, and dismissal of the 
action for violation of the federal venue provision was likewise 
in error.
4
 
C.  Claims Against Flynn and Newsome 
 
Hairston has asserted in a one-count motion for judgment 
that Flynn and Newsome breached their contracts to deliver the 
vehicles to Danville.  While Hairston's allegations did not cite 
federal liability standards, and indeed were pled solely ex 
contractu, they are indisputably claims against common carriers 
arising from loss or damage of goods in interstate 
transportation.  Hence, they are controlled by federal law, which 
preempts state regulation of liability in such circumstances.  
Croninger, 226 U.S. at 505-06. 
 
For example, with respect to Flynn, it is specifically 
                     
     
4Because the trial court did not address the issue of venue 
under Virginia's venue statutes with respect to Hairston's claim 
against Northland, we express no opinion as to that issue. 
alleged that this defendant in its capacity as a common carrier 
contracted to deliver eighteen vehicles received in Manheim, 
Pennsylvania, and that "[f]ifteen of the eighteen motor vehicles 
which Flynn Transport, Inc. was engaged to deliver to Danville, 
Virginia were delivered.  Three motor vehicles were not."  It is 
further asserted that the value of the three vehicles not 
delivered was $53,525.  With respect to Newsome, the motion for 
judgment alleges that Flynn "engaged" Newsome in his capacity as 
a common carrier to deliver nine of the eighteen vehicles, that 
after damaging three of the vehicles, Newsome turned the vehicles 
over to Northland, and that Newsome breached his contract "as a 
connecting carrier to deliver nine motor vehicles to Hairston 
Motor Company in Danville, Virginia."   Although describing 
Newsome as a "connecting carrier," the factual averments 
expressly state that Newsome was also the delivering carrier of 
the nine vehicles he contracted with Flynn to deliver to 
Hairston.  
 
We find, therefore, that Hairston's claims fall squarely 
within the subject matters in which common law claims are 
preempted, and to which federal carrier liability standards apply 
under the Carmack Amendment.   
 
The issue upon which an assignment of error was granted is 
limited to the application of venue standards, rather than the 
sufficiency of plaintiff's motion for judgment to state a prima 
facie claim under the applicable federal standards.  Hence, we 
turn to the question whether the venue provisions of the federal 
statute preclude proceedings in Danville.
5
 
 
III. VENUE WHERE THE CARMACK AMENDMENT CONTROLS 
 
The venue provisions of the Carmack Amendment pertinent to 
this appeal are found at former 49 U.S.C. § 11707: 
 
. . . . 
 
 
 
(d)(1) A civil action under this section may be 
brought against a delivering carrier (other than a rail 
carrier) in a district court of the United States or in 
a State Court.  Trial, if the action is brought . . . 
in a State court, is in a State, through which the 
defendant carrier operates a . . . route. 
 
 
 
(2)(A) A civil action under this section may only 
be brought-- 
 
 
. . . .  
 
 
 
(iii) 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. 
 
 
Clearly, under this statute venue in claims brought in a 
state court against a delivering carrier must be laid in a state 
through which the carrier “operates a . . . route,” and a civil 
action against a carrier causing loss or damage to the cargo must 
be brought in the judicial district where “loss or damage is 
alleged to have occurred.” 
 
Flynn and Newsome assert that Hairston's claim is predicated 
upon the structural harm to, and resulting diminution in value 
of, the vehicles caused by Newsome's accident, and that this is 
                     
     
5The motion for judgment pled (1) that Hairston tendered the 
vehicles in good condition, (2) that three of the vehicles were 
not delivered, and (3) that Hairston suffered a loss as a result. 
 These elements arguably state a viable claim under the Carmack 
Amendment.  See Missouri Pacific Railroad Co. v. Elmore & Stahl, 
377 U.S. 134, 137-38 (1964); see also Continental Grain Co. v. 
Frank Seitzinger Storage, Inc., 837 F.2d 836, 839 (8th Cir. 
1988).  
the "loss or damage" referenced by subsection (d)(2)(A)(iii) of 
the statute.  They further assert that the "loss or damage" 
occurred in Pennsylvania rather than in Virginia and, thus, they 
argue that the statute mandates that the action be tried in 
Pennsylvania.  We disagree. 
 
First, these defendants disregard the fact that the damaged 
vehicles were not delivered to Hairston.  Hairston's motion for 
judgment asserts a claim, alternately against each carrier, that 
they are liable because of failure to deliver in Danville all the 
vehicles consigned to them.  This breach of the carriers' duty, 
and its associated loss to Hairston, occurred in Danville rather 
than in Pennsylvania.  Accordingly, venue in Danville is 
consistent with the mandate of subsection (d)(2)(A)(iii) of the 
federal statute.   
 
Second, we reject the defendants' assertion that venue is 
improper in Danville for lack of a showing that defendants 
"operate a . . . route" through Virginia as required by 
subsection (d)(1), since their liability is predicated on one or 
the other of them being the "delivering carrier."   
 
We are not persuaded that the Carmack Amendment's provisions 
for venue are to be so narrowly construed as to mean that a 
carrier may only be subject to suit in a state through which it 
maintains regularly scheduled or published routes.  Rather, we 
construe them to require simply that an interstate carrier, other 
than a rail carrier, is subject to suit only in a state through 
which it actually transports property.  Here, the motion for 
judgment expressly avers that both Flynn and Newsome contracted 
to transport vehicles within Virginia, that Flynn had delivered 
vehicles into Virginia in the past, and that both Flynn and 
Newsome actually delivered vehicles in Virginia in the current 
instance.  Defendants have not controverted these facts.   
 
We hold that on the facts as pled, these carriers operated a 
route through Virginia as contemplated by subsection (d)(1) of 
the federal Act.  For these reasons, we further hold that 
Danville is a permissible venue with respect to the claims 
against Flynn and Newsome, and that the trial court erred in 
dismissing the action against them on venue grounds. 
 
Accordingly, we will reverse the judgment of the trial court 
and remand the case for further proceedings. 
 
Reversed and remanded.