Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01053/USCOURTS-caed-2_06-cv-01053-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 05:551 Administrative Procedure Act

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This matter was determined to be suitable for decision without *

oral argument. L.R. 78-230(h).

Unless otherwise indicated, all references to Rules are to the 1

Federal Rules of Civil Procedure.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

READY TRANSPORT, INC., a Texas )

corporation, AVAILABLE SHIPPERS, )

INC., a Texas corporation, )

PREFERRED SHIPPERS, INC., a Nevada )

corporation, PROMPT SHIPPERS, INC.,) 

a Texas corporation and QUICK )

TRANSPORTATION, INC., a Nevada )

corporation, )

) 2:06-cv-1053-GEB

Plaintiffs, )

)

v. ) ORDER*

)

AAR MANUFACTURING, INC., a )

California corporation, AAR )

MOBILITY SYSTEMS, a corporation of )

unknown citizenship, )

 )

Defendants. )

)

Defendants move for dismissal of Plaintiffs’ Complaint under

Federal Rules of Civil Procedure 12(b)(6), arguing that it fails to 1

state a claim upon which relief may be granted; for dismissal under

Rule 12(b)(1) for lack of subject matter jurisdiction; and,

alternatively, for summary judgment under Rule 56(b). (Def.s’ Mot. at

1.) Plaintiffs oppose the motions. (Plt.s’ Opp’n at 1.) For the

reasons stated below, each motion is denied. 

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I. Factual Allegations

Plaintiffs are a group of businesses that have hauled

freight for the Federal Government since 1990. (Pls.’ Compl. ¶ 15.) 

AAR makes shipping containers and sells them to the military. (Id. ¶

9.) Under an agreement between AAR and the United States, AAR selects

the carriers who transport the containers, and is required to select

the “best value” carrier pursuant to the guidelines established by the

Surface Deployment and Distribution Command. (Id. ¶ 16.) Plaintiffs

allege AAR selected higher priced carriers than Plaintiffs to haul the

freight even though Plaintiffs were available. (Id. ¶ 19.) 

Plaintiffs further allege that many of these higher priced carriers

used to subcontract the work to Plaintiffs, but Plaintiffs have not

received any of this business for the past two years because AAR has

“blackballed” Plaintiffs. (Id. ¶ 20.) 

II. Rule 12(b)(1) Motion

Defendants argue dismissal is appropriate under Rule

12(b)(1) since Plaintiffs’ rely on the Competition in Contracting Act

(“CICA”) 31 U.S.C. § 3551 et seq. as the basis for federal

jurisdiction; but, Plaintiffs lack standing under this Act; and CICA

claims may only be brought in the United States Court of Claims. 

(Def.s’ Mot. at 14:10-23.) Plaintiffs argue in their Opposition that

the CICA has no bearing on this case. (Pls.’ Opp’n at 10:10.) 

Dismissal under Rule 12(b)(1) is appropriate when there is a

“lack of subject matter jurisdiction.” Plaintiffs assert three claims

against AAR Manufacturing, Inc. and AAR Mobility Systems, all based on

state law: intentional interference with contractual relations,

intentional interference with prospective economic advantage, and

unlawful business practice under California Business and Professional

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Plaintiffs’ tort claims relate to AAR’s alleged interference 2

with subcontracts between Plaintiffs and other freight carriers. And

Plaintiffs’ California Business and Professional Code claim is an

independent cause of action addressing activity unlawful under federal

laws. Cf. Watson Labs., Inc. v. Rhone-Poulenc Rorer, Inc., 178 F.

Supp.2d 1099, 1120 (C.D. Cal. 2004)(holding Defendant’s violation of

Federal Drug Administration regulations is a viable claim under

California Business and Professional Code § 17200. “The ‘unlawful’

practices prohibited by section 17200 are any practices forbidden by

law, be it civil or criminal, federal, state or municipal, statutory,

regulatory, or court-made.”) 

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Code § 17200 et seq. (Pls.’ Compl. ¶¶ 34-48.) Plaintiffs asserted in

their Complaint that “[j]urisdiction of the action against the private

defendants is appropriate under 28 U.S.C. §1332(a)(2) in that this

action is between citizens of different states and the damages

attributable to the causes of action complained of herein in this

complaint are in excess of $75,000 (diversity of citizenship).” 

(Pls.’ Compl. at 4:23-26.) 

Because none of Plaintiffs’ claims are asserted under the

Competition in Contracting Act, Plaintiffs’ standing to sue under 2

that act is immaterial and the issue whether such an action needs to

be brought in the United States Court of Claims need not be decided. 

Diversity jurisdiction under 28 U.S.C. § 1332, “requires

that the parties be in complete diversity and the amount in

controversy exceed $75,000.” Matheson v. Progressive Specialty Ins.

Co., 319 F.3d 1089, 1090 (9th Cir. 2003). “(A) corporation shall be

deemed a citizen of any State by which it has been incorporated and of

the State where it has its principal place of business.” 28 U.S.C. §

1332(c)(1). A corporation’s principal place of business may be

determined by a “place of operations” test which finds a corporation’s

principal place of business is located in the state containing a

substantial predominance of corporate operations. Hohlbein v. Quanta

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Plaintiffs contend, that “[d]uring the preparation of this 3

case, facts have come to light that raise questions regarding diversity

jurisdiction,” specifically, the principle place of business for

Plaintiffs, the Ready Group of companies, is Stockton, California and

Defendant AAR may have a principle place of business in Sacramento

California. (Pls.’ Opp’n at 2:4-14.) 

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U.S. Holdings, Inc., 2007 WL 1526766, at *2 (E.D. Cal. May 24, 2007.) 

If a corporation’s activities are not concentrated in one state, then

the “nerve center” test is used to determine where the Corporation’s

principal place of business is by deciding where the majority of the

corporation’s executive and administrative functions are performed. 

Id.; See also Tosco Corp. v. Communities for a Better Env’t, 236 F.3d

495, 500 (9th Cir. 1990).

Plaintiffs’ assert in their Complaint an amount in

controversy exceeding $75,000, which satisfies the amount in

controversy requirement. (Pls.’ Compl. at 4:23-26.) See St. Paul

Mercury Indem. Co. v. Red Cab Co., U.S. 283, 289 (1938) (amount in

controversy determined from the pleadings). The complete diversity

requirement is also satisfied because, contrary to Plaintiffs’

assertion, no Defendant is a citizen of California. Defendant AAR 3

Mobility Systems is an unincorporated division of Defendant AAR

Manufacturing, Inc. and is therefore not a separate entity for

jurisdictional purposes. Breitman v. May Co. Cal., 37 F.3d 562, 564

(9th Cir. 1994); (Krantz Decl. at ¶ 3.) Accordingly, only the

citizenship of AAR Manufacturing is considered when determining

whether complete diversity exists. AAR Manufacturing is incorporated

under the laws of the State of Illinois and is thus a citizen of the

State of Illinois. (Krantz Decl. at ¶ 2.) Approximately seventy-five

percent of AAR Manufacturing’s total sales are generated in two

facilities in Michigan, which is where it also employs seventy-five

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percent of its workforce. Id. at ¶ 5. Thus, under the place of

operations test, AAR Manufacturing’s principle place of business is in

Michigan. The majority of AAR Manufacturing’s executive and

administrative functions are preformed in Illinois, making its

principal place of business Illinois under a nerve center test. Id.

at ¶ 2. Since AAR Manufacturing is a citizen of Illinois, and has a

principal place of business in either Illinois or Michigan, it is not

a citizen of California. 

For the stated reasons, Defendants’ motion to dismiss for

lack of subject matter jurisdiction is denied. 

IV. Motion for Summary Judgment

Defendants also seek summary judgment. (Def.s’ Mot. at 1

n.1.) Defendants, however, have failed to include a Statement of

Undisputed Facts as required by Local Rule 56-260 in support of their

motion for summary judgment. Therefore, the motion for summary

judgment is denied for failure to comply with Local Rule 56-260. See

Runquist v. Woodford, 2007 WL 926817, at *1 (E.D. Cal. March 26,

2007). 

V. Preemption of State Law Claims

Defendants also seek dismissal of Plaintiffs’ claims under

Rule 12(b)(6) arguing that Plaintiffs’ state law claims are preempted

by federal law and therefore fail to state a claim upon which relief

may be granted. (Def.s’ Mot. at 15:18-24.) 

When considering a Rule 12(b)(6) dismissal motion, all

material allegations in the complaint must be accepted as true and

construed in the light most favorable to the plaintiff. Scheuer v.

Rhodes, 416 U.S. 232, 236 (1974); Cahill v. Liberty Mutual Ins. Co.,

80 F.3d 336, 337-38 (9th Cir. 1996). This means the plaintiff is

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given the benefit of every reasonable inference that can be drawn from

well-pleaded allegations in the complaint. Retail Clerks Int’l Ass'n

v. Shermahorn, 373 U.S. 746, 753 n.6 (1963).

Courts routinely recognize a presumption against federal

preemption of state law. 

In determining whether a federal statute preempts

state law, our sole task is to ascertain the

intent of Congress. . . . We must begin with the

presumption that Congress did not intend to

preempt state law. . . . If we have any doubt

about congressional intent, we are to err on the

side of caution, finding no preemption, “for the

state is powerless to remove the ill effects of

our decision, while the national government, which

has the ultimate power, remains free to remove the

burden.

Malabed v. N. Slope Borough, 335 F.3d 864, 869 (9th Cir. 2003)

(quoting Beveridge v. Lewis, 939 F.2d 859, 863 (9th Cir. 1991)) 

(other internal citations omitted). 

Defendants cite no authority for how Congressional intent is

determined in preemption cases, and provide no evidence of

Congressional intent to preempt the state laws at issue here. 

Defendants rely solely on Boyle v. United Tech. Corp., 487 U.S. 500

(1988), which they cite for the proposition that “[w]here, as here,

the federal interest requires uniform rules, the entire body of state

law applicable to the area conflicts and is replaced by federal

rules.” (Def.s’ Mot. at 15:25-28) (citing Boyle, 487 U.S. at 508.) 

But the Boyle decision was not based on a federal interest principle

promoting uniform federal rules. Rather, the Boyle Court found that

the state law at issue presented “a significant conflict” with federal

policy because

the state-imposed duty of care that is the

asserted basis of the contractor’s liability

(specifically the duty to equip helicopters with

the sort of escape-hatch mechanism petitioner claims was necessary) is

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In their Reply, Defendants argue that Plaintiffs’ claims are 4

moot. (Def.s’ Reply at 3:9-10.) However, the “[c]ourt[] decline[s] to

consider arguments that are raised for the first time in reply.”

Steward v. Wachowski, 2004 WL 2980783, at *11 (C.D. Cal. Dec. 16, 2004).

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precisely contrary to the duty imposed by the Government contract (the

duty to manufacture and deliver helicopters with the sort of escapehatch mechanism shown by the [Government’s] specifications).

Id. at 509, 512. Accordingly, Defendants’ conclusory arguments do not

overcome the presumption against federal preemption of state law. 

Defendants also argue that “the Federal Tort Claims Act

specifically forecloses claims ‘arising out of . . . interference with

contract rights’”(Def.s’ Mot. at 15:3-5, 16:6-7 (citing 28 U.S.C. §

2680(h))), and that “claims to either retrieve or redirect the U.S.

government’s money can only be filed in the U.S. Court of Federal

Claims pursuant to the Tucker Act." Id. at 15:28-16:1-2 (citing 28

U.S.C. § 1491). Both of these arguments fail because none of

Plaintiffs’ claims are against the United States. The Tucker Act only

applies to claims “against the United States” 28 U.S.C. § 1346(a)(2)

and the Federal Torts Claim Act is a limited waiver of sovereign

immunity for tort claims against the United States. 28 U.S.C. § 2674. 

Accordingly, these Acts do not bar Plaintiffs’ claims. 

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VI. AAR’s Immunity under the Government Contractor Defense. 

Defendants argue that since the Federal Tort Claims Act does

not waive the United States’ sovereign immunity for claims arising out

of interference with a government contract, “immunity in this context

should also flow to AAR. . . .” (Def.s’ Mot. at 17:8-11.) To support

their immunity argument, Defendants rely solely on the Supreme Court’s

decision in Boyle, 487 U.S. at 511 (and one other case citing Boyle). 

(Def.s’ Mot. at 17:4-25 (citing Koohi v. United States, 976 F.2d 1328,

1337 (9th Cir. 1992)).) This authority, however, does not support

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Defendants’ position. Therefore, Defendants’ motion to dismiss on

this ground is denied.

VII. Summary 

For the reasons stated, Defendants’ motions are denied. 

IT IS SO ORDERED.

Dated: December 4, 2007

 

GARLAND E. BURRELL, JR.

United States District Judge

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