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Seaside Inland Transport v. Coastal Carriers LLC

United States District Court, E.D. Washington

July 24, 2018

SEASIDE INLAND TRANSPORT, a California corporation, Plaintiff,
v.
COASTAL CARRIERS LLC, and JOHN DUNARD AND NICOLE DUNARD, husband and wife, Defendants. COASTAL CARRIERS LLC, Third-Party Plaintiff,
v.
PAUL MASSINGILL, a Washington individual, and SERVICE DRIVEN TRANSPORT, INC., a Washington corporation, Third-Party Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO DISMISS

          SALVADOR MENDOZA, JR. UNITED STATES DISTRICT JUDGE

         Before the Court, without oral argument, is Coastal Carriers, LLC (Coastal) and John and Nicole Dunard's (collectively, “Defendants”) Motion to Dismiss Second Amended Complaint Pursuant to FRCP 12(c), ECF No. 72. Defendants assert that the Second Amended Complaint should be dismissed for lack of subject matter jurisdiction, or, alternatively, that the tort claims should be dismissed under Federal Rule of Civil Procedure 12(c). Plaintiff Seaside Inland Transport (Seaside), opposes the motion. Having reviewed the pleadings and the file in this matter, the Court is fully informed and denies the motion.

         BACKGROUND

         A. Facts as Alleged in the Complaint[1]

         Paul Massingill is the principal of Seaside, a corporation formed in California and doing business in Wenatchee, Washington. John and Nicole Dunard are the principals of Coastal, a Misssouri limited liability company based in Troy, Missouri. Coastal and Seaside were both involved in the freight brokerage industry. Freight brokers assist shippers in locating carriers qualified to haul certain goods. Freight brokers make a profit by moving the freight for less than the customer is willing to pay to ship the freight. The difference creates a profit retained by the freight broker.

         In 2003, Massingill and Coastal entered into an agency agreement, under which Massingill would broker freight for Coastal in exchange for commissions equal to 70% of the profit earned from the brokerage transaction. In 2004, Massingill incorporated Seaside, and Seaside assumed Massingill's role as a broker for Coastal. The parties never signed a new agreement, but Seaside operated consistent with the terms of the 2003 agreement between Coastal and Massingill. Massingill relocated to Wenatchee, Washington in 2007, and Seaside continued to perform according to the 2003 agency agreement.

         Throughout Seaside's business relationship with Coastal, Coastal failed to pay Seaside commissions due. Coastal offered various justifications for this failure: Coastal determined that it would retain 40% of the profits on any shipments that fell below a 15% profit margin. Coastal also required that each load shipped generate a 5% profit margin. If the load did not generate the required margin, Coastal would withhold commissions in the amount needed to reach the 5% profit margin. Coastal also required Seaside to retain large sums of commissions in escrow accounts. Under the 2003 agreement, Coastal could place up to $5, 000 of Seaside's commissions due into an escrow account to cover potential losses resulting from Seaside's negligence. Coastal withheld commissions in excess of $5, 000. On information and belief, Seaside alleges that Coastal never deposited the excess funds into an escrow account. Coastal also imposed a multitude of fees-for example, software access fees, fees for collection on unpaid accounts, etc.-that were offset from Seaside's commissions. Later on, Coastal withheld commissions from Seaside on the basis that Seaside owed Coastal money due to a shipper's failure to pay for carrier services brokered by Seaside.

         On two occasions, in 2008 and 2015, Coastal induced Seaside to expand its business. Seaside leased large office space, purchased equipment, and hired additional staff on the understanding that Seaside would continue to work closely with Coastal. Although Seaside trained new freight brokers and permitted them to use Seaside's facilities and equipment, the freight brokers were classified by Coastal as independent contractors rather than Seaside's subagents. When a freight broker completed a brokerage transaction, Coastal paid 30% to the subagent, 25% to Seaside, and retained 40% of the profit for itself. This arrangement cost Seaside $280, 486.64 in unpaid commissions. In 2015, the Washington State Department of Labor and Industries audited Coastal for misclassifying its Seaside-based subagents as independent contractors.

         B. Procedure

         The pleadings in this case thus far involve a web of complaints, counterclaims, third-party claims, and amendments thereto. Seaside filed suit against Coastal in Chelan County Superior Court on March 13, 2017. Coastal removed the action to this Court on April 19, 2017. Coastal answered the complaint and asserted counterclaims against Seaside. Coastal also lodged a third-party complaint against Seaside's principal, Paul Massingill, and Service Driven Transport, Inc. (Service Driven). Seaside answered the counterclaims on June 20, 2017, and Service Driven and Massingill filed their respective answers on June 29, 2017. Massingill also asserted a third-party crossclaim against Coastal's principals, John and Nicole Dunard. ECF No. 19. Seaside amended its complaint on July 28, 2017, and again on May 14, 2018, ECF No. 70, and Defendants moved to dismiss, ECF No. 72.

         LEGAL STANDARD

         Judgment on the pleadings is appropriate when, even if all material facts in the pleading under attack are true, the moving party is entitled to judgment as a matter of law. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). Generally, a court may consider only allegations made in the complaint and the answer; extrinsic factual material may not be taken into account. Powe v. City of Chicago, 664 F.2d 639, 642 (7th Cir. 1981). However, materials properly attached to a complaint as exhibits may be considered. Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426, 429 & n.2 (9th Cir. 1978); Fed.R.Civ.P. 10(c) (“A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.”). Rule 12(c) itself and supporting case law indicate that if matters outside the pleadings are presented to and not excluded by the court, the motion for judgment on the pleadings is converted into a Rule 56 summary judgment motion. Hal Roach Studios, Inc., 896 F.2d at 1550. The fact that such extrinsic material was submitted to the court does not automatically convert a motion for judgment on the pleadings into one for summary judgment. It must appear that the court relied on the extrinsic evidence in reaching its conclusions before that conversion occurs. Homart Dev. Co. v. Sigman, 868 F.2d 1556, 1561-62 (11th Cir. 1989).

         Here, the parties submitted declarations in support of their motions and responses. The Court did not rely on these declarations in forming its decision. The only fact outside the Second Amended Complaint of which the Court took notice is the fact that Seaside is not currently registered as a foreign corporation with the Washington Secretary of State. Because registration-or lack thereof-of a foreign corporation with the Washington Secretary of State is an official public record and its contents are not reasonably in dispute, it is appropriately the subject of judicial notice under Federal Rule of Evidence 201(b)(2). See, e.g., Ariz. Libertarian Party v. ...


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