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United Parcel Service Co. v. DNJ Logistic Group, Inc.

United States District Court, W.D. Kentucky, Louisville Division

July 19, 2017




         This matter is before the Court upon Defendants' Motion to Dismiss (DN 12), which is ripe for adjudication. For the reasons discussed below, the motion is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         This is action arises out of a billing dispute between Plaintiff United Parcel Service Co. (“UPS”), Plaintiff UPS Worldwide Forwarding (“Worldwide Forwarding”), Defendant DNJ Logistic Group, Inc. (“DNJ”), and DNJ's CEO, Defendant Ralph Nabavi (“Nabavi”).[1]Worldwide Forwarding contracted with UPS to transport Worldwide Forwarding's packages. (Compl. ¶ 19, DN 1). To move certain of those packages across international routes that it did not fly, in September 14, 2010, UPS entered into a Small Package Cargo Handling Services Agreement (“the Agreement”) with DNJ, a provider of freight forwarding services. (Compl. ¶¶ 2, 18-19). Among other things, the Agreement obligated DNJ to “provide personnel and equipment for the movement of UPS small package cargo . . . .” (Compl. Ex. 1, at 2, DN 1-2 [hereinafter Agreement]; Compl. ¶ 4). UPS shipped packages from its Louisville airport hub to its operations at Miami, Newark, and Dulles airports where it tendered the packages to DNJ. DNJ then placed the packages into its own vehicles and delivered them to common carrier airlines for shipment to certain international destinations. (Compl. ¶¶ 36-39).

         Under Section 2.2 of the Agreement, UPS was required “to pay [DNJ] the price set forth in the attachment(s)” to the Agreement for services performed and to “forward payments to [DNJ] no later than thirty (30) days after receipt of a [DNJ] invoice.” (Agreement 5). The parties executed a number of attachments to the Agreement, which provided that DNJ would charge a designated “rate per kilo” for particular routes, also known as “lanes.” (Agreement 12; Compl. ¶ 6). For example, the parties agreed to certain rates per kilo for flights from Miami to Lima, Peru, and different rates per kilo for flights from Newark to Tel Aviv, Israel. (Agreement 10-11; Compl. ¶ 6).

         According to Plaintiffs, at Nabavi's direction, DNJ employees sent weekly invoices to Plaintiffs seeking payment for DNJ's services. (Compl. ¶ 44). Despite the terms of the Agreement, Worldwide Forwarding, not UPS, paid these invoices until June 2016. (Compare Agreement 5, with Compl. ¶ 49). In June 2016, Plaintiffs determined that they were being overbilled by DNJ-they contend DNJ was supposed to multiply the “actual weight” of the packages tendered to DNJ by the applicable “rate per kilo” and invoice UPS for the product, but DNJ did not do so. Instead, DNJ allegedly used “inflated” package weights to compute the amounts it invoiced Plaintiffs, which caused Worldwide Forwarding to pay DNJ more than UPS owed under the Agreement. (Compl. ¶¶ 34-35, 45, 69). Upon discovery of this practice, Plaintiffs confronted DNJ and demanded remuneration. (Compl. ¶¶ 51-52). DNJ balked; it returned packages, refused to further perform and, ultimately, terminated the Agreement. (Compl. ¶¶ 52-54).

         Plaintiffs brought this lawsuit to recover from Defendants for the alleged overbillings. UPS and Worldwide Forwarding each assert breach of contract claims against DNJ. Worldwide Forwarding asserts separate claims against DNJ for negligent misrepresentation and unjust enrichment, and it asserts a claim for negligent representation against Nabavi personally, premised on the notion that he directed DNJ's employees to send the false invoices.[2] Defendants have moved to dismiss all claims under Fed.R.Civ.P. 12(b)(6).


         The Court has jurisdiction over Plaintiffs' claims because there is diversity of citizenship among the parties and the amount in controversy exceeds $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332(a)(1).


         A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” and is subject to dismissal if it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 8(a)(2); Fed. R. Civ. P 12(b)(6). When considering a motion to dismiss, courts must presume all factual allegations in the complaint to be true and make all reasonable inferences in favor of the non-moving party. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008) (citing Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983)). To survive a motion to dismiss under Rule 12(b)(6), the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Traverse Bay Area Intermediate Sch. Dist. v. Mich. Dep't of Educ., 615 F.3d 622, 627 (6th Cir. 2010) (internal quotation marks omitted) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim becomes plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).


         A. Breach of Contract

         Under Kentucky law, Plaintiffs must support their claim for breach of contract with sufficient facts to establish the existence of “the contract, the breach, and . . . the loss or damage by reason of the breach.” Fannin v. Commercial Credit Corp., 249 S.W.2d 826, 827 (Ky. 1952) (citations omitted). Plaintiffs allege that the Agreement required DNJ to bill Plaintiffs for the actual weight of the packages tendered; that DNJ breached the Agreement by instead billing Plaintiffs for weights in excess of the actual weight of the packages tendered, which “artificially increased the amounts charged to Plaintiffs”; and that “[a]s a direct consequence of DNJ's breach of the Agreement, Plaintiffs have been damaged in an amount to be determined at trial.” (Compl. ¶¶ 64-70). Defendants take issue with Plaintiffs' claim that the Agreement required DNJ to bill based upon actual weight, but that is not the basis of their motion.

         Defendants first argue that the Court must dismiss UPS's breach of contract claim because Plaintiffs failed to allege that UPS suffered damages as a result of DNJ's alleged breach of the Agreement. At first glance, Defendants' argument has some appeal, as the Complaint alleges-and Plaintiffs admit-that Worldwide Forwarding, not UPS, paid DNJ's invoices. The Complaint, however, also alleges that when confronted with accusations of overbilling DNJ stopped performing under the Agreement and returned shipments to UPS which “resulted in service failures for UPS (i.e., missing shipping deadlines for its customers).” (Compl. ¶ 59). Considering this allegation, along with Plaintiffs' general allegation that they were “damaged in an amount to be determined at trial[, ]” (Compl. ¶ 70), Plaintiffs have sufficiently alleged that UPS incurred damages as a result of DNJ's failure to perform its contractual obligations to UPS.

         As Defendants point out, Plaintiffs did not specifically allege what monetary damages UPS incurred as a result of the missed shipping deadlines. Yet, only special damages need be pleaded with specificity and, as explained below, those kinds of damages are not recoverable in this case. See Fed. R. Civ. P. 8(a), 9(g). Plaintiffs were merely required to allege “enough facts to state a claim to relief that is plausible on its face, ” which they have done. Traverse Bay Area Intermediate Sch. Dist., 615 F.3d at 627 (6th Cir. 2010) (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 570). In their opposition to Defendants' motion to dismiss, Plaintiffs explain that “UPS [] inevitably suffered damages as a result [of the returned shipments], including the cost of finding other vendors to tender the packages.” While the Court cannot look to arguments made in briefs to determine whether the Complaint states a claim for relief, see Guzman v. U.S. Dep't of Homeland Sec'y, 679 F.3d 425, 429 (6th Cir. 2012), the Court can (indeed, must) make reasonable inferences in favor of Plaintiffs. See Total Benefits Planning Agency, 552 F.3d at 434 (6th Cir. 2008) (citing Great Lakes Steel, 716 F.2d at 1105). Given that Plaintiffs have alleged that DNJ returned packages to UPS and UPS was damaged as a result, it is reasonable to infer that UPS incurred damages in securing alternative transportation for the packages.

         Defendants next contend that Section 10.1 of the Agreement negates any damages that UPS incurred as a result of the returned packages because those damages would be classified as consequential or special. Section 10.1 provides, “[i]n no event shall UPS or [DNJ] be liable for any reason for special, incidental, or consequential damages, including but not limited to lost revenue or lost profit, resulting from performance or failure to perform under this Agreement.” (Agreement 6).

         The terms consequential and special damages are not defined in the Agreement, but Kentucky courts have explained the difference between those types of damages and so called “general damages.”[3] Consequential and special damages are those that “do not naturally or necessarily result from the breach but are, nevertheless, recoverable if caused by the breach and are foreseeable.” See Dennis Anderson Park Lake Apartments, LLC v. Louisville & Jefferson Cty. Metro. Sewer Dist., No. 2012-CA-000288-MR, 2014 Ky. App. Unpub. LEXIS 822, at *15 (2014) (citing McCracken & McCall v. Bolton, 200 S.W.2d 923 (Ky. 1947)). General damages, which are not excluded by Section 10.1, are “usually the cost of remedying the breach or defective performance . . . .” See Id. (citing State Prop. & Bldgs. Comm'n v. H.W. Miller Constr. Co., 385 S.W.2d 211 (Ky. 1964)).

         The Court disagrees with Defendants' blanket contention that all of UPS's potential damages are barred by the Agreement; at this point, it is too early to tell if the damages alleged by UPS fall under Section 10.1, or if they fall outside Section 10.1 as general damages. As indicated above, it is reasonable to infer from allegations in the Complaint that UPS suffered damages in arranging alternative transportation for the packages after DNJ refused to deliver them. Such damages would be merely a cost of remedying DNJ's alleged breach. Therefore, to the extent the ...

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