Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_13-cv-01754/USCOURTS-caed-2_13-cv-01754-5/pdf.json

Nature of Suit Code: 195
Nature of Suit: Contract Product Liability
Cause of Action: 28:1332 Diversity-Product Liability

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

STARBUCKS CORPORATION, a 

corporation,

Plaintiff,

v.

AMCOR PACKAGING DISTRIBUTION, 

et al.,

Defendants.

CIV. NO. 2:13-1754 WBS CKD

MEMORANDUM AND ORDER RE: MOTION 

TO DISMISS FIRST AMENDED CROSSCOMPLAINT

----oo0oo----

This matter is again before the court on third-party 

defendant Ozburn-Hessey Logistics’ (“OHL”) motion to dismiss 

Pallets Unlimited’s First Amended Third-Party Complaint (“FATC”)

(Docket No. 46) pursuant to Federal Rule of Civil Procedure 

12(b)(6) for failure to state a claim upon which relief can be 

granted, (Docket No. 48). The factual and procedural history is 

set forth in this court’s Memorandum and Order of November 5, 

2014 (Docket No. 44) dismissing Pallets Unlimited’s original 

third-party complaint with leave to amend. 

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Pallets Unlimited re-asserts its claims of equitable

indemnification and negligence against OHL. Whereas its original 

Third-party Complaint was silent as to the ownership of the 

pallets after they were given to OHL, Pallets Unlimited now 

alleges that Starbucks owned the coffee bags, coffee beans, and 

wooden pallets while they were kept at OHL’s warehouse. (FATC ¶

14.) Pallets Unlimited also adds an allegation that OHL stored 

these items for Starbucks as a “warehouseman/bailee.” (Id.) OHL 

allegedly kept the pallets in its warehouse until they were 

shipped to Starbucks, during which time Pallets Unlimited 

maintains that OHL bore sole responsibility for storing and 

maintaining the pallets such that they did not develop mold.

(Id. ¶¶ 9-10.) The FATC also alleges that none of the wooden 

pallets made by Pallets Unlimited contained any mold or excessive 

moisture at the time they were delivered to OHL’s warehouse. 

(Id. ¶ 8.) 

In light of these new allegations, the court now 

addresses the sufficiency of the allegations of the FATC under 

the standards of Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 

(2007); and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

I. Equitable Indemnity Claim

As discussed at some length in this court’s Order of 

November 5, 2014, California law requires that, “[w]ith limited 

exception, there must be some basis for tort liability against 

the proposed indemnitor . . . generally based on a duty owed to 

the underlying plaintiff.” BFGC Architects Planners, Inc. v. 

Forcum/Mackey Constr., Inc., 119 Cal. App. 4th 848, 852-53 (4th 

Dist. 2004). Ordinary breach of contract, without something 

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more, will not support liability in tort. See Erlich v. Menezes, 

21 Cal. 4th 543, 551-52 (1999). However, “the same wrongful act 

may constitute both a breach of contract and an invasion of an 

interest protected by the law of torts.” Id. at 551. 

A. A Bailee’s Duty with Regard to Bailed Goods

“California law generally defines a bailment as the 

delivery of a thing in trust for a purpose upon an implied or 

express contract.” Whitcombe v. Stevedoring Servs. of Am., 2 

F.3d 312, 316 (9th Cir. 1993) (citing Greenberg Bros. v. Ernest 

W. Hahn, Inc., 246 Cal. App. 2d 529, 531 (2d Dist. 1966)).

Generally, contract terms govern bailment relationships. See, 

e.g., George v. Bekins Van & Storage Co., 33 Cal. 2d 834, 848-49

(1949). 

Several California statutes also impose an obligation 

to exercise a certain degree of care with regard to bailed 

property on the bailee--called a “depository” by the California 

Civil Code.

1 Of relevance here, California Civil Code section 

1852 states that “[a] depositary for hire must use at least 

ordinary care for the preservation of the thing deposited.”

2 

Cal. Civ. Code § 1852. The California Commercial Code also sets 

out an additional standard of care for a specific type of bailee

 

1 See Whitcombe, 2 F.3d at 316 (“The California Civil 

Code uses the term depository and depositor in place of the 

common law terms bailee and bailor. . . . The terms mean the same 

things.”).

2 California Civil Code section 1851 defines a nongratuitous deposit as “storage” and deems that “[t]he depositary 

in such case is called a depositary for hire.” Cal. Civ. Code 

§ 1851. 

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called a “warehouse” or “warehouseman,”

3 stating in section 7204 

that “[a] warehouse is liable for damages for loss of or injury 

to the goods caused by its failure to exercise care with regard 

to the goods that a reasonably careful person would exercise 

under similar circumstances.” Cal. Com. Code § 7204(a). 

These statutory obligations bear a striking similarity 

to California’s general negligence statute, California Civil Code 

section 1714(a), which provides a duty that sounds in tort. See

Cal. Civ. Code § 1714(a) (“Everyone is responsible . . . for an 

injury occasioned to another by his or her want of ordinary care 

or skill . . .”); Cabral v. Ralphs Grocery Co., 51 Cal. 4th 764, 

771 (2011). In addition, California courts that discuss the duty 

a bailee or a warehouseman owes with respect to bailed property 

frequently describe a breach of that duty as “negligent” or 

“negligence,”

4 although they leave the source of that duty and 

the kind of remedies available ambiguous.

Several authorities support the conclusion that these 

statutory duties give rise to tort liability. In particular, the 

Uniform Commercial Code Comment included in California Commercial 

Code section 7101 notes that Article Seven “does not attempt to 

 

3 The Civil Code defines a “warehouse” as “a person 

engaged in the business of storing goods for hire.” Cal. Com. 

Code § 7102(a)(13).

4 See, e.g., Greenberg Bros., 246 Cal. App. 2d at 533 (“A 

depositary or bailee for hire is liable only when he has been 

guilty of some negligence. He is chargeable only with ordinary 

care and diligence in safeguarding his bailor’s property . . .” 

(quoting Baxter v. Shanley-Furness Co., 193 Cal. 558, 561 

(1924)); Scott’s Val. Fruit Exch. v. Growers Refrigeration Co., 

81 Cal. App. 2d 437, 440 (1st Dist. 1947) (“[A]n action will lie 

against a bailee for negligent destruction of or injury to 

deposited goods.”).

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define the tort liability of bailees, except to hold certain 

classes of bailees to a minimum standard of reasonable care.” 

Cal. Com. Code § 7101 cmt. (emphasis added). This comment 

suggests that the California Commercial Code actually does define 

the tort liability of those classes of bailee in Division Seven

(the California equivalent of UCC Article Seven), including the

“warehouse” bailee. See Cal. Com. Code §§ 7102(a)(13), 7204(a). 

Additionally, at least one California Court of Appeal has allowed 

a bailor to maintain causes of action for both breach of bailment 

contract and negligence in tort after bailed property was

damaged. See Gerbert v. Yank, 172 Cal. App. 3d 544, 549-50 (2d 

Dist. 1985). 

OHL maintains that these statutes do not give rise to

liability in tort but merely imply a duty of care into the terms 

of every bailment contract. (See OHL’s Reply at 7 n.7.) It

supports its argument primarily with the California Court of 

Appeal case of Windeler v. Scheers Jewelers, 8 Cal. App. 3d 844 

(1st Dist. 1970). (See OHL’s Reply at 7-9.) However, this court 

does not read Windeler as precluding the existence of an 

independent tort duty under either California Civil Code section 

1852 or California Commercial Code section 7204(a). The section 

of Windeler cited by OHL discusses damages for a plaintiff’s 

mental suffering and emotional distress, not damages to her 

property. See Windeler, 8 Cal. App. 3d at 849-51. Both 

statutory provisions at issue here apply specifically to bailed 

property and impose liability only for damage to that property. 

See Cal. Com. Code § 7204(a) (“A warehouse is liable for damages 

for loss of or injury to the goods caused by its failure to 

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exercise care with regard to the goods . . .” (emphasis added)); 

Cal. Civ. Code § 1852 (“A depositary for hire must use at least 

ordinary care for the preservation of the thing deposited.” 

(emphasis added)). Nor did Windeler involve the kind of 

“warehouse” bailee that Pallets Unlimited alleges here. The 

court thus finds Windeler distinguishable from the instant case. 

Accordingly, because OHL has not provided, and the 

court cannot find, any persuasive authority that precludes tort 

liability under California Civil Code section 1852 or California 

Commercial Code section 7204(a), the court concludes that a 

“warehouseman/bailee” relationship may provide a basis for 

liability sounding in tort as between OHL and Starbucks.

B. Pallets Unlimited States a Claim for Equitable 

Indemnity

Pallets Unlimited also plausibly alleges the remaining 

elements of equitable indemnity. It alleges that mold developed 

because of OHL’s “lack of ordinary care in the management and 

maintenance of the OHL Warehouse, and its failure to exercise due 

diligence to ensure that [Starbucks’s] bags, beans and pallets 

suffered no harm while stored at the OHL Warehouse.” (FATC ¶¶ 9-

10, 14-15.) As a result, Starbucks allegedly suffered

$4,932,115.76 in damages, which through this lawsuit, it has 

sought to recover from Amcor and Pallets Unlimited. (Id. ¶ 12.) 

Pallets Unlimited alleges that any liability it incurs to 

Starbucks is attributable to OHL’s fault. (Id. ¶ 17.) 

Accordingly, because Pallets Unlimited has alleged a 

duty in tort between OHL and Starbucks, fault on the part of OHL,

and resulting damages to Pallets Unlimited for which OHL is 

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allegedly responsible, see Bailey v. Safeway, Inc., 199 Cal. App. 

4th 206, 217 (1st Dist. 2011) (listing elements), Pallets 

Unlimited has stated a plausible claim for equitable indemnity. 

The court must therefore deny OHL’s motion to dismiss this claim. 

II. Negligence Claim

In its November 5, 2014 Order, this court rejected 

Pallets Unlimited’s argument that OHL owed a duty to protect it 

from the prospect of purely economic loss it now faces as a 

result of Starbucks’s claims against it, noting that Pallets 

Unlimited did not allege any injury to its person or property, 

instead alleging only damages in the form of “potential 

liability” to Starbucks, as well as “damages relating to 

attorney’s fees and costs of suit herein.” After surveying 

California law, the court could not find any basis for such a 

duty. (See Nov. 5, 2014 Order at 12-16.) 

The court sees no significant difference between the 

negligence claim it rejected in its prior Order and the 

negligence claim Pallets Unlimited re-asserts in its FATC. 

(Compare FATC ¶¶ 19-25, with Pallets’s Compl. ¶¶ 15-18.) Again, 

Pallets Unlimited does not allege any injury to its person or 

property. Instead, it alleges that OHL breached its duty to 

Starbucks by failing to ensure that the bags, beans, and pallets

owned by Starbucks were kept free of mold. (FATC ¶ 24.) Pallets 

Unlimited then asserts that, due to this breach, it has suffered 

damages in the form of “potential liability to [Starbucks],”

“damages relating to attorneys’ fees and costs of suit herein.”

(Id. ¶ 25.) 

What changes Pallets Unlimited does make to its 

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negligence claim only strengthen the court’s conclusion that this

negligence claim essentially duplicates Pallets Unlimited’s

indemnification claim. (See Nov. 5, 2014 Order at 15 n.7 

(suggesting that Pallets Unlimited’s negligence claim might be 

construed as an attempt to salvage its indemnity claim).) This 

time, Pallets Unlimited explicitly alleges that OHL should 

compensate it for any liability it incurs to Starbucks because 

“such liability would be solely, directly, and legally due to the 

primary and active fault . . . of Cross-Defendant OHL.” (FATC ¶

24.) 

This new allegation repeats verbatim Pallets 

Unlimited’s allegation under its equitable indemnity claim. (Id.

¶ 17 (“. . . such liability would be solely, directly and legally 

due to the primary and active fault . . . of Cross-Defendant 

OHL”).) Both Pallets Unlimited’s indemnity claim and its 

negligence claim attempt to provide Pallets Unlimited with the 

same relief: compensation for the damages and costs it incurs in 

its suit against Starbucks. (Compare FATC ¶ 18 (stating that 

Pallets Unlimited is entitled to be indemnified for “damages, 

judgments, attorneys’ fees, and related costs or expenses 

incurred in defending the principal action”), with id. ¶ 25 

(stating that Pallets Unlimited has suffered damages including 

“potential liability to [Starbucks] based on [Starbucks’s] 

Complaint, damages relating to attorneys’ fees, and costs of suit 

herein”).)

Nonetheless, Pallets Unlimited urges this court to 

recognize a new duty based on the “special relationship” between 

it and OHL by applying the factors enumerated by the California 

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Supreme Court in J’Aire Corp. v. Gregory, 24 Cal. 3d 799 (1979). 

These factors include 

(1) the extent to which the transaction was intended 

to affect the plaintiff, (2) the foreseeability of 

harm to the plaintiff, (3) the degree of certainty 

that the plaintiff suffered injury, (4) the closeness 

of the connection between the defendant’s conduct and 

the injury suffered, (5) the moral blame attached to 

the defendant’s conduct and (6) the policy of 

preventing future harm.

Id. at 804. 

A California Court of Appeal’s recent rejection of this 

argument is instructive. See Mega RV Corp. v. HWH Corp., 225 

Cal. App. 4th 1318, 1340-42 (4th Dist. 2014). The manufacturer

in that case also argued that the court should recognize a new 

duty of care under J’Aire. Id. at 1340-41. Faced with analogous

facts, the court in Mega RV applied the six J’Aire factors and 

concluded that none of them supported the recognition of such a 

duty. Id. at 1341-42. 

Pallets Unlimited makes no attempt to distinguish Mega 

RV and fails to address the six J’Aire factors. It argues only

that, because OHL and it were involved in a “chain of supply” for

the wooden pallets at issue, and “[i]n the litigious world we 

live in,” it was “foreseeable” that Starbucks would seek 

compensation from Pallets Unlimited for damages caused to its 

property, OHL owed it a duty of care. (See FATC ¶ 22; Pallets’s 

Opp’n at 13-16.) However, foreseeability alone cannot give rise

to a duty under California law, see Erlich, 21 Cal. 4th at 552, 

and Pallets Unlimited provides no other reason for imposing a 

duty in this case. 

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Accordingly, because no authority supports the 

existence of a duty of care between OHL and Pallets Unlimited and 

the court declines to recognize one under J’Aire, see Mega RV, 

225 Cal. App. 4th at 1338-42, the court must grant OHL’s motion 

to dismiss this claim. 

IT IS THEREFORE ORDERED that third-party defendant 

Ozburn-Hessey Logistics’s motion to dismiss be, and the same 

hereby is, GRANTED without leave to amend with respect to thirdparty plaintiff Pallets Unlimited’s negligence claim and DENIED 

in all other respects.

Dated: January 15, 2015

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