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Central Freight Lines, Inc. v. Amazon Fulfillment Services, Inc.

United States District Court, W.D. Washington

November 7, 2017

CENTRAL FREIGHT LINES, INC., Plaintiff,
v.
AMAZON FULFILLMENT SERVICES, INC., et al., Defendants.

          ORDER DENYING MOTION FOR JUDGMENT ON THE PLEADINGS

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE

         I.INTRODUCTION

         Before the court is Plaintiff Central Freight Lines, Inc.'s (“Central Freight”) motion for partial judgment on the pleadings. (MJOP (Dkt. # 51).) Defendant Amazon Fulfillment Services, Inc., opposes the motion. (MJOP Resp. (Dkt. # 54).) The court has considered the motion, the parties' submissions in support of and in opposition to the // motion, the relevant portions of the record, and the applicable law. Being fully advised, [1]the court DENIES the motion for the reasons set forth below.

         II. BACKGROUND

         This case arises from a contract dispute between Central Freight, a freight carrier, and Amazon Fulfillment Services, Inc. (“Amazon”), a subsidiary of the online retailer Amazon.com. (See generally Compl. (Dkt. # 1).) Central Freight is a “less-than-truckload (‘LTL') freight carrier” that provided shipping services to Amazon pursuant to a Transportation Agreement (“the Agreement”) executed on July 7, 2011. (Id. ¶¶ 2, 10-11, Ex. A (“Agreement”).) The Agreement details the services Central Freight provided to Amazon, including “receiving, loading, storing, transporting, [and] unloading” freight. (Id. ¶¶ 13-14.) Amazon agreed to pay Central Freight for those services pursuant to a rate chart incorporated into the Agreement “or as mutually agreed to by the parties (which may include email).” (Agreement § 2.1; see also Id. Ex. B-1, Ex. B-2.) The parties further agreed that the “rate structure will not be modified during the term of th[e] Agreement, except upon mutual agreement of the parties (which may include email).” (Agreement § 2.1.) The Agreement also contains an integration clause and a provision precluding modification “unless it is in writing and signed by Amazon and [Central Freight].” (Id. § 11.8.)

         The Agreement further provides that Amazon may “conduct a performance audit” to determine whether Central Freight is meeting its obligations under the Agreement. (Id. § 1.2.) The provision also allows Amazon to seek reimbursement “for the full amount of any overcharge identified in the audit.” (Id.) The Agreement also includes an “Invoices” section that states that “[a]ll claims filed by Amazon for overcharge . . . must be filed within 18 month[s] of the original invoice” (id. ¶ 2.2), which Central Freight characterizes as a “look-back” period (MJOP at 7).

         In mid-2016, Amazon audited Central Freight's services and concluded that it had overpaid Central Freight under the Agreement. (Compl. ¶ 35; see id., Ex. D (“Demand Letter”).) Amazon concluded that Central Freight had overcharged in three ways: (1) by failing to apply a 30 percent discount to shipments of eight or more pallets (“8-pallet shipments”) (Demand Letter at 3); (2) by improperly double-counting shipments from the same origin to the same destination on the same day (id. at 2-3); and (3) by supplying Amazon the incorrect Tender ID, which Amazon uses to identify the shipment for notification and transportation purposes (id. at 3). Based on those asserted errors, Amazon demanded that Central Freight reimburse Amazon $2, 856, 602.00 no later than September 15, 2016.[2] (Id. at 2.)

         Central Freight disputes Amazon's contentions. It alleges that in early 2012, the parties orally modified the Agreement's pricing for 8-pallet shipments, and that its subsequent billing had been consistent with that oral modification and subsequent dealings with Amazon. (See Compl. ¶¶ 26-27.) In 2014, Central Freight prepared a written addendum memorializing those oral modifications, but Amazon never signed the addendum. (Id. ¶¶ 31-32.) Central Freight disputes Amazon's double-counting and Tender ID allegations, which according to Central Freight are based on Amazon's unenforceable attempt to unilaterally amend the Agreement. (Id. ¶¶ 37-63.) Based on these disputes, Central Freight declined to reimburse any of the money that Amazon demanded. (Id. ¶¶ 37, 49, 63, 68.)

         In response, an Amazon “affiliate”-Amazon Truckload Services-withheld payment from Central Freight for other services performed.[3] (Id. ¶ 76.) The Amazon affiliate indicated that it was “setting off funds owed by Central Freight” and would “start to pay any outstanding funds once the funds owed to Amazon have been recouped as part of this process.” (Id. ¶ 87, Ex. F.)

         Central Freight contends that Amazon wrongfully withheld the alleged overcharges. (Id. ¶ 16.) Central Freight asserts the following claims: declaratory judgment (1) that Amazon breached the Agreement by (a) “back-charging Central Freight a 30 percent discount for shipments of 8 pallets or more, ” (b) “back-charging Central Freight for separately invoicing Amazon for shipments from the same origin to the same destination on the same day, ” and (c) “back-charging Central Freight for the Tender ID [i]ssue, ” and (2) that Amazon “wrongfully withheld payments as purported set-off to the amounts it wrongfully claimed it overpaid” (id. ¶¶ 90-92); breach of contract (id. ¶¶ 93-98); violation of the Washington Consumer Protection Act (“CPA”), RCW 19.86, et seq.; and the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (id. ¶¶ 99-110); and fraud (id. ¶¶ 111-19).

         Amazon brings a number of counterclaims against Central Freight: (1) declaratory judgment that (a) Amazon did not breach the Agreement, (b) the parties did not orally modify the Agreement, (c) Central Freight materially breached the Agreement by failing to charge the contractual rate, failing to include the Tender IDs, and invoicing Amazon multiple times for the same shipment, and (d) Amazon had a right to set off the alleged overcharges (Countercl. (Dkt. # 48) ¶¶ 37-39)[4]; (2) breach of contract (id. ¶¶ 40-45); (3) recoupment and setoff (id. ¶¶ 46-49); (4) violation of the CPA (id. ¶¶ 50-55); and (5) unjust enrichment (id. ¶¶ 56-59). Amazon alleges that the parties never modified the rate structure for the 8-pallet shipments. (Id. ¶ 10.) Instead, Amazon contends that beginning in or about January 2012, Central Freight stopped charging Amazon pursuant to the rate structure in the Agreement and instead started issuing “spot quotes” based on the size and locations of shipments. (Id. ¶ 11.) Amazon further alleges that “[p]ursuant to ordinary and expected commercial practice between sophisticated contracting parties, and as allowed by Washington law, [Amazon] set off the amount it overpaid Central Freight from sums it otherwise owed Central Freight.” (Id. ¶ 35.) Once it had “recouped” the overcharges, Amazon asserts that it “ceased setting off funds.” (Id. ¶ 36.)

         On July 20, 2017, Central Freight moved for partial judgment on the pleadings for its declaratory judgment and breach of contract claims.[5] (See MJOP at 1.) Amazon opposes the motion. (See MJOP Resp.) The court now addresses the motion.

         III.ANALYSIS

         A. ...


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