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East Coast Transport & Logistics, LLC v. Cesar Transport

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


March 17, 2008

EAST COAST TRANSPORT & LOGISTICS, LLC, PLAINTIFF,
v.
CESAR TRANSPORT, INC.; INSURANCE CENTER OF DADE, INC.; UNDERWRITERS AT LLOYDS LONDON; PENOBSCOT GROUP, LLC; EASTERN TRUCKING, INC.; AND CESAR J. PEDRERA; DEFENDANTS.

The opinion of the court was delivered by: Irenas, Senior District Judge

HONORABLE JOSEPH E. IRENAS

OPINION

Before the Court are: 1) Defendant Cesar Transport, Inc.'s ("Cesar Transport") Motion to Vacate Default Judgment; and 2) the Motion to Extend Time to file responsive pleading by Eastern Trucking, Inc. ("Eastern Trucking") and Cesar J. Pedrera.*fn1 For the reasons stated herein, both motions will be granted.

I.

This suit arises out of the hijacking of a freight truck and the theft of its cargo. Joy Systems, Inc. ("Joy"), contracted with Plaintiff, East Coast Transport & Logistics, LLC ("ECT"), to arrange for the transportation of electronic equipment*fn2 from Joy's New Jersey facility to Joy's facility in Miami, Florida. ECT does not transport any freight itself. Rather, ECT is licensed by the Federal Motor Carrier Safety Administration ("FMCSA") to act as a broker, making arrangements between "shipper-customers" like Joy, and motor carriers who have "common or contract authority" from the FMCSA to transport freight. (Amend. Compl. at ¶ 1).

In this case, ECT arranged for Cesar Transport, located in Miami, to transport the freight. ECT required proof of Cesar Transport's cargo insurance coverage, which ECT alleges Defendant Insurance Center of Dade, Inc. ("Insurance Center")*fn3 provided to it. Specifically, the Amended Complaint alleges that Insurance Center provided ECT with a "Certificate of Liability Insurance form as required by the FMCSA," and that the certificate showed that Cesar had $100,000.00 of cargo insurance coverage. (Amend. Compl. at ¶ 16). ECT claims that the certificate was fraudulent.

Cesar Transport leased a truck from Euschial Solis. Mr. Solis drove the truck that carried Joy's cargo. On May 24, 2006, the cargo was stolen while in transit from New Jersey to Florida.*fn4 Cesar Transport promptly filed a claim with its insurance company, Defendant Underwriters At Lloyds London ("Lloyds").*fn5 However, under the terms of Cesar Transport's insurance policy, Cesar was only covered up to $20,000.00 for losses due to theft. (Ex. E to Amend. Compl.).

ECT paid Joy $65,818.00, the alleged value of the cargo. ECT then demanded that Cesar Transport pay ECT $65,818.00, but Cesar Transport allegedly refused. Cesar Transport claims ECT owes it $12,315.00 for unrelated freight transportation services rendered between July and October 2006.*fn6

In February or March, 2007, ECT filed a complaint in New Jersey Superior Court against Cesar Transport, Insurance Center, Canal Insurance Company, and Penobscot, seeking a judgment in the amount of $65,818.00. Penobscot removed the case to this Court.*fn7

ECT amended the complaint on June 26, 2007, asserting various counts against Cesar Transport, Insurance Center, Lloyds, Penobscot, Eastern Trucking, and Cesar J. Predrera.*fn8 ECT seeks the alleged value of the stolen cargo ($65,818.00), compensatory and punitive damages.*fn9 In addition to its claim that Cesar Transport refuses to pay for the stolen cargo, ECT asserts that Defendant Pedrera created Eastern Trucking with the intent to defraud ECT and steal $65,818.00.

Lloyds and Penobscot settled with ECT for $20,000.00 on July 16, 2007. Approximately a month later, on August 24, 2007, the Clerk of Court entered Default Judgment against Cesar Transport and Insurance Center for the amount of $45,818.00. Cesar Transport now moves to vacate the default judgment.*fn10

II.

Fed. R. Civ. P. 60(b) states: "On motion and just terms, the court may relieve a party . . . from a final judgment . . . for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect." In exercising its discretion to vacate a default judgment, the trial court must consider: "(1) whether the plaintiff will be prejudiced if the default is lifted; (2) whether the defendant has a meritorious defense; and (3) whether the default was the result of the defendant's culpable conduct." Zawadski De Bueno v. Bueno Castro, 822 F.2d 416, 419-20 (3d Cir. 1987). The Third Circuit "does not favor default judgments and in a close case, doubts should be resolved in favor of setting aside the default and reaching the merits." Id. at 420.

III.

A.

Cesar Transport asserts that this Court should find that the entry of default judgment was a result of excusable neglect. Cesar Transport explains that it believed that its insurance company was handling the case and had settled the matter. Specifically, Defendant Pedrera certifies that, Until very recently, I was under the distinct impression that Cesar's insurance carrier was not only investigating this matter, but also protecting our interests in this case. In March, 2007, Cesar received the [state court complaint]. The complaint was sent to Cesar's insurance agent. (Pedrera Cert. ¶¶ 7-8). Pedrera also certifies that Cesar Transport received a copy of the settlement and release between Lloyds/Penobscot and ECT (see Pedrera Cert. Ex. E), and mistakenly concluded that the case against Cesar Transport had been settled.

Indeed, according to Pedrera, he was not aware that the case had been removed to federal court until he received notice of the default judgment. At that time, he says he realized his mistake and "immediately sought the assistance of an attorney." (Pedrera Cert. ¶ 10).

In opposition, ECT argues that Cesar Transport has no meritorious defense because the Carmack Amendment clearly places liability on connecting carriers such as Cesar Transport for losses sustained while freight is being transported. However, Cesar Transport disputes that it is a "connecting carrier."

According to Cesar Transport, it was "at most, a freight forwarder, acting as agent for the plaintiff in the procurement of the freight transportation services." (Cesar's Reply Br. at 2).*fn11 Cesar Transport asserts that questions of fact exist as to its function with regard to the cargo in this case, and that its liability depends on a determination of what it actually did.

The Court concludes that Cesar Transport has sufficiently carried its burden of presenting a potentially meritorious defense at this stage of the litigation. The Court also concludes that Cesar Transport's conduct in failing to respond to the Complaint and the Amended Complaint did not result from bad faith or intentional neglect. Lastly, ECT will not be prejudiced by setting aside the default judgment and litigating this case on the merits. Indeed, in opposing the motion, ECT has not asserted that prejudice will result.

Accordingly, the Court will grant Cesar Transport's Motion to Vacate the Default Judgment.

B.

ECT has agreed to extend the time for Eastern Trucking and Pedrera to file a responsive pleading to the Amended Complaint.

The Court will enter an appropriate order.

IV.

For the foregoing reasons, the Court will grant Cesar Transport's Motion to Vacate Default Judgment; and grant the Motion to Extend Time by Eastern Trucking and Pedrera. An appropriate order will be issued.

Joseph E. Irenas, S.U.S.D.J.


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