DocketNumber: Case No. CV 11-01329 MMM (FMOx)
Citation Numbers: 913 F. Supp. 2d 925
Judges: Morrow
Filed Date: 12/21/2012
Status: Precedential
Modified Date: 11/26/2022
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Ample Bright Development, Ltd. commenced this action on February 11, 2011 against Comis International, doing business as Comis Customs Brokers Co., and Frank Noah.
That matter was tried to the court on July 10 and 11, 2012.
I. FINDINGS OF FACT
A. Background Information
1. Plaintiff Ample Bright Development Ltd. is a Chinese trading company that receives inquiries from overseas companies regarding handbag accessories and finds suitable Chinese factories to produce those accessories for the companies.
3. After Pacific gave Ample Bright the first of a series of purchase orders, Ample Bright looked for a Chinese company that had capacity to fill the order; eventually, it selected Alice Leather.
4. Pacific introduced Ample Bright to Comis International. Ample Bright had not previously used Comis as a freight forwarder or shipping agent.
B. Course of Dealing
5. When shipping goods overseas, it is common practice to secure the goods with an original bill of lading. The shipper gives the goods to a freight forwarder in exchange for the original bill of lading, then sends the original bill of lading to the intended recipient of the goods so that it can obtain release of the goods once they arrive at their destination.
6. In connection with the purchase orders it received from Pacific, Ample Bright at times advised the freight forwarder when a shipment was booked that the bill of lading would be issued in the form of a telex. At other times, it authorized release of the goods by telex after a bill of lading had been issued, by surrendering the original bill of lading to the forwarder and paying a fee.
7. With regard to the six shipments to Pacific at issue in this case, Ample Bright received bills of lading in Comis’s name from its Hong Kong
8.Noah acknowledged that the terms of a bill of lading must be followed.
9.' Ample Bright was not told that Comis would not wait for its authorization béfore delivering the goods to Pacific.
10.As Noah himself acknowledged, Comis had no course of dealing with Ample Bright that permitted Comis to release goods without Ample Bright’s authorization, either by surrender of the original bills of lading or by telex release.
C. Damages
11. Pacific was to pay $267,635.10 for the goods at issue in this action.
12. In the summer of 2010, Pacific sought a chargeback (a return of funds paid) from Ample Bright, due to the fact that certain Ample Bright shipments had arrived late.
14. Any findings of fact that are deemed to be conclusions of law are incorporated herein as such.
II. CONCLUSIONS OF LAW
A. Conversion Claim
15. Ample Bright first asserts a conversion claim.
16. As the purchaser of the goods, Ample Bright had a right to possess the property that comprised the shipments at issue in this case.
17. Each of the bills of lading for the shipments expressly provided: “The surrender of the original order bill of lading properly endorsed shall be required before the delivery of the property.” Ample Bright did not surrender the original bills of lading, nor did it authorize release of the goods by telex, as it had done in the past. Nonetheless, Comis released the goods to Pacific in violation of the agreement between Comis and Ample Bright. In doing so, Comis wrongfully deprived Ample Bright of its property.
18. Defendants argue that the parties had a course of dealing that permitted Comis to release the goods to Pacific.
20. Although defendants cite the testimony of Peonie Kwock, Stephen McCarthy, Martin Terzian and Anna Fox as support for this assertion, Kwock and McCarthy both testified that Ample Bright never agreed to Comis’ release of the shipped goods absent surrender of the original bill of lading or telex release of the goods. Terzian, for his part, stated that he and McCarthy never discussed bills of lading or when the bills would be surrendered. Additionally, he conceded that McCarthy made no representations to him regarding surrender of the bills of lading.
21.The question is whether there was ever any course of dealing between Ample Bright and Comis pursuant to which Ample Bright agreed to Comis’s release of goods without surrender of the original bill of lading or a telex release.
22. Because the evidence does not support defendants’ assertion that Ample Bright and Comis had a common course of dealing pursuant to which Comis, with Ample Bright’s knowledge, released shipped goods without requiring surrender of the original bill of lading or a telex release of the goods, the court cannot find that Ample Bright waived its right to require either surrender of the bill of lading or telex release.
23. Defendants argue additionally that Ample Bright ratified their wrongful release and conversion of the goods that comprised the six shipments because, upon discovering that the goods had been delivered to Pacific, Ample Bright accepted partial payment from Pacific and agreed to extend the time within which Pacific had to pay the balance of the purchase price.
24. Blowers is distinguishable on two bases. First, Kwock testified that Pacific had not paid for the goods that comprised the six shipments at issue.
25. Defendants also argue that Ample Bright cannot recover for conversion because it suffered no damage. Specifically, defendants assert that McCarthy, on Ample Bright’s behalf, accepted a $300,000 charge-back from Pacific based on goods that were delivered late.
26. Ample Bright adduced evidence that it requested that Pacific provide documentation from Wal-Mart showing that the chargeback related to specific Ample Bright purchase orders, style numbers, and/or shipments. Both Kwock and McCarthy testified that because such documentation was not forthcoming, Ample Bright never agreed to the chargeback.
27. More fundamentally, it is impossible to discern from the evidence in the record whether the chargeback Pacific accepted from Wal-Mart relates to the six shipments at issue in this case. It is only if the chargeback related to those shipments, of course, that it would go to reduce the value of the goods converted by defendants and/or be equivalent to a payment by Pacific for those goods. The Wal-Mart chargeback shows an “event date” of July 22, 2010, and an “acceptance date” of July 26, 2010.
28. In sum, it is undisputed that, despite receiving the goods, Pacific did not pay Ample Bright for the shipments at issue in this case.
B. Breach of Contract
29. Ample Bright also asserts a claim for breach of contract.
30. The bills of lading constitute contracts between Comis and Ample Bright. See Oak Harbor Freight Lines, Inc. v. Sears Roebuck, & Co., 513 F.3d 949, 954 (9th Cir. 2008) (“a bill of lading is the basic transportation contract between the shipper/consignor and the carrier, the terms and conditions of which bind the shipper and all connecting carriers”). “Delivery to a person who is not the holder, without the holder’s authorization, constitutes ... a breach of contract.” BII Finance Co., 95 Cal.App.4th at 124, 115 Cal.Rptr.2d 312. Defendants delivered the goods at issue in this case to Pacific without Ample Bright’s authorization, despite unambiguous language in the bills of lading that the goods could not be released absent surrender of the original bill of lading. The parties’ course of dealing modified this requirement to permit defendants to deliver the goods to Pacific once they received a telex release from Ample Bright as well. Beyond these forms of authorization, however, Ample Bright did not waive the requirements of the contract.
31. Defendants breached the six contracts at issue by delivering the goods that comprised the shipments to Pacific without receiving either the original bill of lading or a telex release. Ample Bright fulfilled its obligations under the contract, and suffered damages by being deprived of the goods and/or their equivalent value. Consequently, defendants are liable to Ample Bright for breach of contract.
32. Ample Bright next alleges a cause of action for negligence.
33.“Under general negligence principles ... a person ordinarily is obligated to exercise due care in his or her own actions so as to not to create an unreasonable risk of injury to others, and this legal duty generally is owed to the class of persons who it is reasonably foreseeable may be injured as the result of the actor’s conduct.” Lugtu v. California Highway Patrol, 26 Cal.4th 703, 716, 110 Cal.Rptr.2d 528, 28 P.3d 249 (2001). In shipping goods that were the property of Ample Bright and releasing those goods to a third party, it was reasonably foreseeable to defendants that Ample Bright might be harmed. Consequently, defendants owed Ample Bright, the holder of the original bills of lading, a duty of care. See BII Finance Co., 95 Cal.App.4th at 124, 115 Cal.Rptr.2d 312 (stating that a “bailee is under a duty not to deliver the goods without surrender of the document”); see also Johnson Products Co., Inc. v. M/V La Molinera, 628 F.Supp. 1240, 1246 (S.D.N.Y.1986) (“The relationship between a shipper and a freight forwarder is ‘fiduciary’ and of ‘the greatest trust and fidelity.’ ICS, as the agent of Johnson Products, had a duty to take care in arranging and supervising the transport of the cargo,” quoting United States v. Ventura, 724 F.2d 305, 311 (2d Cir.1983)).
34. Defendants breached this duty by releasing the shipments to Pacific without authorization, via surrender of the original bill of lading or telex release. This conduct caused Ample Bright’s injury, as defendants’ actions permitted Pacific to receive the goods without paying Ample Bright. While Ample Bright would not have been injured had Pacific paid, the risk that Pacific would not pay was foreseeable to defendants, particularly given that one purpose of a bill of lading is to ensure that payment for goods is received before they are delivered. Cole v. Town of Los Gatos, 205 Cal.App.4th 749, 770, 140 Cal. Rptr.3d 722 (2012) (“Under traditional tort principles, once a defendant’s conduct is found to have been a cause in fact of the plaintiffs injuries, the conduct of a third party will not bar liability unless it operated as a superseding or supervening cause, so as to break the chain of legal causation between the defendant’s conduct and the plaintiffs injuries. The misconduct of a third party will not ordinarily have this effect if the misconduct itself was foreseeable to the defendant” (citation and quotation marks omitted)). As detailed above, moreover, Ample Bright has adequately proved damages due to defendants’ conduct.
35. Consequently, defendants are liable to Ample Bright on its negligence , claim.
36. Defendants argue that “Ample Bright is barred from recovery by [the] unclean hands doctrine,” because it has not paid Alice for the goods at issue in this litigation and because it did not perform its obligations under the charge-back agreement.
37. The unclean hands doctrine bars recovery by a plaintiff (1) whose behavior is tainted by inequity or bad faith (2) that occurred in acquiring the right he now asserts. Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir.1985).
“It is fundamental to the operation of the doctrine that the alleged misconduct by the party relate directly to the transaction concerning which the complaint is made. Unclean hands does not constitute ‘misconduct in the abstract, unrelated to the claim to which it is asserted as a defense.’ ” Seller Agency Council, Inc. v. Kennedy Center for Real Estate Educ., Inc., 621 F.3d 981, 986-87 (9th Cir.2010) (citations and quotation marks omitted).
“ ‘The misconduct which brings the clean hands doctrine into operation must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants.’ ” Gen-Probe, 926 F.Supp. at 952 (quoting Fibreboard Paper Products Corp., 227 Cal.App.2d at 728-29, 39 Cal.Rptr. 64); see also Garcia v. World Sav., FSB, 183 Cal.App.4th 1031, 1044, 107 Cal.Rptr.3d 683 (2010).
38. Defendants’ reliance on the equita- ‘ ble doctrine of unclean hands is misplaced. As noted, whether or not Ample Bright entered into the purported chargeback agreement and whether or not it honored its obligations under any such agreement, defendants have not demonstrated that the alleged chargeback agreement relates directly to the transactions at issue in this action. W^hile Ample Bright’s failure to pay Alice Leather is more closely connected to the action, Ample Bright’s failure to pay Alice does not “affect the equitable relations between the litigants,” since Alice is not a party in this case. Garcia, 183 Cal.App.4th at 1044, 107 Cal.Rptr.3d 683. It is not inequitable to make defendants pay for goods they received from Ample Bright
E. Damages
31. Under California law, “[f]or the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” Cal. Civ.Code § 3333. “For the breach of an obligation arising from contract, the measure of damages ... is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.” Cal. Civ.Code § 3300.
32. Ample Bright seeks compensatory damages of $264,635.10, the amount Pacific was to pay for the goods at issue in this case.
33. Ample Bright additionally requests an award of punitive damages.
III. CONCLUSION
For the reasons stated, the court concludes that Ample Bright is entitled to $264,635.10. The court will enter judgment in that amount.
. Complaint, Docket No. 1 (Feb. 11, 2011).
. Third Party Complaint, Docket No. 9 (May 2, 2011).
. The rule provides: "At least,,14 days -before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.” Fed.R.Civ.Proc. 68(a).
. Notice of Acceptance of Pacific's Rule 68 Offer of Judgment to Comis and Noah (“Offer of Judgment Acceptance”) Docket No. 65 (June 8, 2012); Pacific's Rule 68 Offer of Judgment to Comis and Noah ("Offer of Judgment”), Docket No. 64 (June 8, 2012).
. Rough Transcript of Proceedings, Morning of July 10, 2012 ("July 10 Morning RT”); Rough Transcript of Proceedings, Afternoon of July 10, 2012 ("July 10 Afternoon RT”); Rough Transcript of Proceedings, Morning of July 11, 2012 (“July 11 Morning RT”); Rough Transcript of Proceedings, Afternoon of July 11, 2012 ("July 11 Afternoon RT”).
. Plaintiff Ample Bright Development, Ltd.'s Closing Brief ("PL's Closing Brief”), Docket No. 84 (July 23, 2012); Defendants Comis International and Frank Noah’s Closing Brief ("Defs.’ Closing Brief”), Docket No. 87 (July 23, 2012).
. July 10 Morning RT at 10:20:25.
. Id. at 10:16-19.
. July 10 Afternoon RT at 73:22-74:3.
. Id. at 74:4-7.
. Id. at 79:6-8.
. July 10 Morning RT at 14:13:23-14:14.
. Id. at 15:10-21.
. Id. at 15:25-16:24.
. Id. at 16:25-17:3-18.
. Id. at 17:4-11; July 10 Afternoon RT at 27:4_6. '
. July 10 Afternoon RT at 24:14-26:16. By the time trial began, Noah had incorporated his business as Comis Global and Comis Custom Brokers. {Id. at 26:6-9.) At the time of the shipments in question, however, Comis was a fictitious business name under which Noah operated.
. Id. at 18: 9-19:14.
Jd. at 18:11-14.
. July 10 Morning RT at 27:17-24.
. Id. at 17:19-25.
. Id. at 25:2-5; see also Exhs. 1-6.
. Id. at 25:2-5, 38:23-39:7; July 10 Afternoon RT at 30:4-9; Exh. 67.
. July 10 Afternoon RT at 28:14-18.
. Id. at 30:4-17 ("Q. Now, isn't it true that despite the language in these bill[s] of lading! 1 that you just identified and in all of the bill[s] of lading!] issued by Comis International, Comis, in fact, released goods to consignees without the Telex release or without the bill of lading? A. For this six bill[s] of lading! ], yes. Q. In fact, for more than just these six bills of lading, Comis International disregarded the language in the bill of lading and released the goods to Pacific without authorization by Ample Bright, correct? A. Yes. Q. And for these six, in particular, Comis did not receive a Telex release, correct? A. Yes. Q. Comis did not receive the original bill of lading, correct? A. Yes”).
. Id. at 32:19-33:1 ("Question: So you’re telling me that it’s your company’s practice to require shippers to separately tell you to hold the goods even though your contract requires you to hold it? Answer: Not for the — not for everybody. Question: Only for Ample Bright? Answer: Only for Pacific”).
. July 10 Morning RT at 25:24-26:2.
. Id. at 30:16-23.
. July 10 Afternoon RT at 35:19-23.
. Id. at 37:22-38:5 ("Q. And prior to the first unauthorized release, which was on or about July 17, Comis did not have a course of dealing or practice with Ample Bright that would have allowed for the release of goods prior to Ample Bright’s authorization, correct? A. Correct. Q. In fact, Comis never had such a course of dealing with Ample Bright, correct? A. Yes”); see also id. at 42:12-20.
. Id. at 68:25-69:1. Comis appears to have followed this pattern with respect to several of the shipments that Ample Bright telex released as well. (See Exh. 202.) Noah asserted he had been told by Pacific that it had an agreement with Ample Bright and Fortune that Pacific was to receive the goods immediately upon their arrival in Los Angeles. He stated that Martin Terzian and Anna Fox of Pacific told him that Pacific would then deliver the goods to its customer, Wal-Mart, "turn the goods into cash,” and then pay Ample Bright.” (July 10 Afternoon RT at 31:9-19.)
. July 11 Morning RT at 95:22-96:3.
. See Exhs. 7-17.
. July 10 Morning RT at 50:20-54:18.
.Id. at 54:19-21.
. Id. at 55:3-9.
. Id. at 44:17-23, 75:23-77:4.
. Id. at 45:7-12, 78:11-15; July 11 Morning RT at 42:12-13.
. July 10 Morning RT at 44:24-45:6, 77:20-78:5.
. July 11 Morning RT at 85:23-86:3; July 11 Afternoon RT at 31:13-18, 33:7-10.
. July 11 Morning RT at 87:1-18; ‘ July 11 Afternoon RT at 31:19-25 ("Q. Were there discussions at that meeting as far as providing supporting documents? A. Oh, yes, he did. Q. Mr. McCarthy requested supporting documents? A. Yes. Yes — yes”).
.Complaint, ¶¶ 22-25.
. Defs.' Closing Brief at 11.
. id.
. July 11 Morning RT at 107:10-19. See also id. at 96:11-13, 21-24 (stating that he never had any discussions with McCarthy about release of the original bill of lading being required before the goods could be delivered, i.e., about the fact that there was a requirement that payment for the goods be made prior to release of the goods).
. July 11 Afternoon RT at 46:23-25.
. Id. at
. Id. at 24:16-18.
. See, e.g., July 10 Morning RT at 39:10-40:1; 68:23-69:4; 70:5-17; July 11 Morning RT at 19:4-11.
. Defendants conflate release of the goods with payment, and argue that "[t]he course of dealing between Pacific and Ample Bright became elastic in that Pacific always settled the payments after the delivery of the merchandise to Pacific without releasing the original bill of lading, with reference to an open account.” (Defs.’ Closing Brief at 7.) While certainly there is a relationship between surrender of the original bill of lading or telex release of the goods and payment, the testimony was undisputed that on certain oc
. July 11 Afternoon RT at 25:22-26:4 id. at 48:6-9.
. Ample Bright argues that McCarthy did not have authority to bind Ample Bright to any agreement, and notes that both Kwock and McCarthy testified he lacked such authority. While, under California law, the acts of the agent cannot themselves create apparent authority, Preis v. American Indemnity Co., 220 Cal.App.3d 752, 761, 269 Cal.Rptr. 617 (1990) ("Ostensible authority must be established through the acts or declarations of the principal and not the acts or declarations of the agent”), Ample Bright knew that McCarthy was communicating with Pacific on its behalf (as well as on behalf of Fortune) and permitted those communications to proceed with its apparent input and participation. "A principal is liable 'when the principal knows the agent holds himself or herself out as clothed with certain authority and remains silent.’ ” NORCAL Mutual Ins. Co. v. Newton, 84 Cal.App.4th 64, 78, 100 Cal.Rptr.2d 683 (2001) (quoting Jacoves v. United Merchandising Corp., 9 Cal.App.4th 88, 103, 11 Cal.Rptr.2d 468 (1992)).
.Defs.’ Closing Brief at 12.
. Defs.’ Closing Brief at 9-10.
. July 10 Morning RT at 50:20-23.
. Id. at 51:10-13 (invoice corresponding to bill of lading marked Exh. 6); 51:23-24 (invoice corresponding to bill of lading marked Exh. 5); 52:3-4 (invoice corresponding to bill of lading marked Exh. 4); 52:11-12, 52:22-24 (invoices corresponding to bill of lading marked Exh. 3); 53:6-8 (invoice corresponding to bill of lading marked Exh. 2); 54:16-18 (invoices invoice corresponding to bill of lading marked Exh. 1).
. See July 10 Morning RT 50:28-54:10 (identifying the invoices associated with each of the six bills of lading); Exhs. 7-16 (invoices). While Exhibit 230 reflects that a portion of certain of the relevant invoices was paid, Terzian testified that the payments reflected the 10 percent amount owed to Fortune, not any portion of the 90 percent amount owed to Ample Bright. (July 11 Morning RT at 102:22-103:4; see also Exh. 230 (line items for P090095-4 (less than 10 percent payment), P090100-7 (10 percent payment), P090101-2 (10 percent payment), P090102-3 (10 percent payment)).
.Defendants also argue that Ample Bright suffered no damage because it caused Pacific to pay $48,000 for iPhone cases that it never shipped. (See July 11 Morning RT at 48:16-51:4; 80:7-16; July 11 Afternoon RT at 37:19-38:1.) The evidence is contradictory as to whether a small portion of the iPhone cases Pacific ordered were delivered. After being shown Exhibit 201, Terzian said that a "very small portion” of the order was delivered. (July 11 Morning RT at 111:20-112:11.) Anna Fox, on the other hand, said that the entry on Exhibit 201 related to a different shipment. (See July 11 Afternoon RT at 2-11.) The dispute is immaterial because defendants proffer no authority for the proposition that a plaintiff suffers no damage due to a defendant’s wrongful release of goods to a third party if plaintiff owes that third party money in connection with a completely separate transaction.
. See, e.g., July 10 Morning RT at 45:2-6, 46:11-47:4, 48:5-7, 56:23-57:2, 77:2-78:5; July 10 Afternoon RT at 85:15-87:10, 90:23-91:7, 92:16-25, 93:15-94:6, 104:25-105:12. See also Exhs. 217, 224.
. July 11 Morning RT at 87:1-18; July 11 Afternoon RT at 31:19-25.
. Exhibit 218. In fact, Terzian testified that he first discussed the chargeback with WalMart in June or July 2010. (See July 11 Morning RT at 81:6-82:1.)
. Exhibit 230.
. Exhibit 230 reflects that these earlier shipments were paid in full by Pacific.
. Defendants here cannot take advantage of any affirmative obligation Ample Bright owes to Pacific that is unrelated to the six shipments at issue in this action because that obligation does not serve to reduce the value of the goods that comprised the shipments or constitute an agreed reduction in the price of those goods (i.e., the equivalent of a partial payment by Pacific).
. See July 10 Morning RT at 8:13-15 (defense counsel arguing that a chargeback was required "because of late delivery and some defects”),
Complaint ¶¶ 26-31
. Id., ¶¶ 32-34.
. Defs.’ Closing Brief at 14-15.
. An equitable defense such as unclean hands may be asserted against claims at law, including conversion. Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F.Supp. 948, 952 (S.D.Cal.1996) (citing Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal.App.2d 675, 728-29, 39 Cal.Rptr. 64 (1964); Unilogic, Inc. v. Burroughs Corp., 10 Cal.App.4th 612, 621-23, 12 Cal.Rptr.2d 741 (1992)).
. Pl.'s Closing Brief at 7.
. Id. at 14-16.
. Defs.’ Closing Brief at 14.
.See Complaint at 6; Proposed Amended Final Pretrial Conference Order, Docket No. 73 (Jun. 22, 2012).