FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MASON AND DIXON INTERMODAL,
INC.,
Plaintiff-counter-defendant-
Appellant,
v.
LAPMASTER INTERNATIONAL LLC; No. 09-17833
HARTFORD INSURANCE CO.,
D.C. No.
Defendants-counter-claimants-
Appellees, 3:08-cv-01232-
VRW
v.
OPINION
ITG TRANSPORTATION,
Third-party-defendant-cross-
claimant-Appellee,
W.E.S.T. FORWARDING SERVICE,
Third-party-defendant-counter-
claimant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, Chief District Judge, Presiding
Argued and Submitted
December 9, 2010—San Francisco, California
Filed January 18, 2011
Before: Robert E. Cowen*, A. Wallace Tashima, and
Barry G. Silverman Circuit Judges.
*The Honorable Robert E. Cowen, Senior United States Circuit Judge
for the Third Circuit, sitting by designation.
893
894 MASON AND DIXON v. LAPMASTER INTERNATIONAL
Opinion by Judge Silverman
896 MASON AND DIXON v. LAPMASTER INTERNATIONAL
COUNSEL
Lori A. Sebransky, Matthew S. Conant, Lombardi, Loper &
Conant, Oakland, California; Paul Keenan (argued), Keenan
Cohen & Howard, Jenkintown, Pennsylvania, for the appel-
lant.
MASON AND DIXON v. LAPMASTER INTERNATIONAL 897
Joseph D. Ryan (argued), Ryan & Lifter, San Ramon, Califor-
nia, for the appellee.
OPINION
SILVERMAN, Circuit Judge:
Mason and Dixon Intermodal, Inc. (MDII), a motor carrier,
appeals the district court’s judgment in its diversity action
regarding damage to goods in interstate carriage against Lap-
master, a shipper; Lapmaster’s insurer, Hartford; and a freight
broker, ITG Transportation, Inc. Lapmaster and Hartford
brought claims for the value of the damage to the freight
against MDII under the Carmack Amendment, and California
law negligence claims against ITG; and MDII maintained
state law negligence and contribution claims against ITG. ITG
entered into a settlement agreement with Lapmaster and Hart-
ford, and moved for dismissal pursuant to a good faith settle-
ment under Cal. Civ. Proc. Code §§ 877 and 877.6. The
district court found the settlement to be in good faith and
granted ITG’s motion, therefore barring MDII’s claims
against ITG. MDII appealed.
We affirm.
FACTUAL BACKGROUND
Lapmaster purchased two large precision flat lapping and
polishing machines manufactured in Japan for shipment and
sale to a customer located in Fremont, California. The
machines were “oversized,” that is, too large to fit into stan-
dard intermodal shipping containers. The machines were
delivered without incident from Japan to the Port of Oakland,
California. Lapmaster hired World Express Shipping Trans-
portation and Forwarding Services, Inc. (WEST) to handle
customs entry and arrange for transportation of the machines
898 MASON AND DIXON v. LAPMASTER INTERNATIONAL
to Fremont. WEST contracted with ITG, a broker, which
arranged for MDII to deliver the machines from the Port of
Oakland to Fremont. During communications between WEST
and ITG, ITG was made aware that the freight would be
dimensionally oversized; however, WEST sent ITG a dispatch
order that did not note the size of the freight. ITG called
WEST to confirm whether the freight was “in gauge,” that is
standard-sized, or oversized. WEST told ITG that the freight
was “in gauge.” ITG then faxed a delivery order and bill of
lading to MDII that requested “standard flat racks,” that is,
equipment designed to accommodate standard-size freight.
Accordingly, MDII dispatched two drivers, each equipped
with standard flat racks, to pick up the freight at the Port of
Oakland.
While being transported by MDII, the machines were dam-
aged in two separate, but essentially identical, accidents. The
first driver set out from the Port of Oakland on December 26,
2007; however, the second driver had brake problems and did
not set out until the next day. En route from the Port of Oak-
land to Fremont, the oversized machine transported by the
first driver struck the 23rd Avenue overpass on Interstate 880,
and suffered irreparable damage. Although the second driver
did not set out until the next day, the second driver nonethe-
less managed to irreparably damage the second machine in
the exact same manner as the first — by striking it against the
23rd Avenue overpass on Interstate 880. Lapmaster’s insurer,
Hartford, paid Lapmaster $820,554.92, exclusive of $10,000
in deductibles, on account of the accidents.
PROCEDURAL BACKGROUND
MDII initiated the proceedings before the district court by
filing a complaint against Lapmaster and Hartford, seeking to
limit its liability and for indemnification arising out of the
accidents. The district court exercised diversity jurisdiction
over MDII’s initial complaint. Lapmaster and Hartford filed
counterclaims against MDII and third-party complaints
MASON AND DIXON v. LAPMASTER INTERNATIONAL 899
against WEST and ITG. The district court exercised supple-
mental jurisdiction over the third-party complaints.
After the parties filed motions for summary judgment and
partial summary judgment, the court issued an order disposing
of nineteen causes of action in their entirety and a portion of
thirteen others. Of the remaining claims, Lapmaster and Hart-
ford maintained against ITG only state law claims for negli-
gence, implied indemnity, and negligent interference with
prospective economic advantage. Lapmaster and Hartford
maintained only Carmack Amendment claims against MDII.
The district court also made several findings regarding limita-
tions on liability, including that (1) Lapmaster and Hartford’s
maximum recovery could not exceed their actual losses of
$804,693.18, (2) MDII had not limited its liability to an
amount less than the maximum recovery, and (3) ITG’s liabil-
ity was limited to $200,000 under a price quote provided to
Lapmaster. Although it found that ITG had effectively limited
its liability to $200,000 as to Lapmaster and Hartford, the dis-
trict court also held that this finding “does not affect any
indemnification claims MDII may have against ITG.” The
district court then allowed MDII to add counterclaims against
ITG for indemnity and negligence.
ITG, Lapmaster, and Hartford entered into a conditional
settlement agreement by which ITG agreed to pay a total of
$150,000 to be divided between Lapmaster and Hartford in
exchange for a release of liability from all claims arising out
of this incident. ITG then moved for dismissal pursuant to a
good faith settlement under Cal. Civ. Proc. Code §§ 877 and
877.6. The district court granted ITG’s motion over MDII’s
opposition. Applying the factors stated in Tech-Bilt, Inc. v.
Woodward-Clyde Associates, 38 Cal. 3d 488, 499 (1985), the
district court found that the settlement between ITG, Lap-
master, and Hartford was reached in good faith. The district
court found that a $150,000 settlement was “well within an
appropriate range,” considering that ITG’s liability to Hart-
ford and Lapmaster was limited to $200,000, per the district
900 MASON AND DIXON v. LAPMASTER INTERNATIONAL
court’s earlier finding. The district court concluded that “it is
clear that the facts of the case and the position of the parties
mandated roughly this type of result.”
The cause of action was dismissed on November 24, 2009.
MDII timely filed a notice of appeal on December 21, 2009.
JURISDICTION
The district court properly exercised diversity jurisdiction
over MDII’s initial complaint against Lapmaster and Hartford
pursuant to 28 U.S.C. § 1332. And, although not affirmatively
alleged in MDII’s complaint, it also had federal question
jurisdiction pursuant to 28 U.S.C. § 1331 because Count I of
the complaint alleged a claim for declaratory relief under the
Carriage of Goods by Sea Act, 46 U.S.C. § 30701 note. The
district court thus properly exercised supplemental jurisdic-
tion over the third-party complaints pursuant to 28 U.S.C.
§ 1367(a). We have jurisdiction pursuant to 28 U.S.C. § 1291.
STANDARD OF REVIEW
We review the district court’s application of California
Code of Civil Procedure sections 877 and 877.6 to ITG’s
motion to dismiss pursuant to a good faith settlement as a
question of law to be reviewed de novo. Willdan v. Sialic
Contractors Corp., 158 Cal. App. 4th 47, 54, 69 Cal. Rptr. 3d
633 (2007). We review the trial court’s determination that a
settlement was made in good faith for an abuse of discretion.
Id.
DISCUSSION
I. The District Court Correctly Applied State Substan-
tive Law to ITG’s Motion to Dismiss Pursuant to
Good Faith Settlement
[1] When a district court sits in diversity, or hears state law
claims based on supplemental jurisdiction, the court applies
MASON AND DIXON v. LAPMASTER INTERNATIONAL 901
state substantive law to the state law claims. See Galam v.
Carmel (In re Larry’s Apartment), 249 F.3d 832, 837 (9th Cir.
2001); Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055
n.2 (9th Cir. 2000). This court has held that California Code
of Civil Procedure section 877 constitutes substantive law.
See Fed. Savings & Loan Ins. Corp. v. Butler, 904 F.2d 505,
511 (9th Cir. 1990). The district court correctly applied Cali-
fornia law to resolve ITG’s motion to dismiss pursuant to
good faith settlement. See id.
II. The District Court Did Not Err in Applying Califor-
nia Code of Civil Procedure Sections 877 and 877.6
Because the Carmack Amendment Does Not Preempt
State Settlement Law.
MDII argues that federal common law regarding partial set-
tlement of cases with multiple defendants should preempt
state settlement laws in cases involving liability under the
Carmack Amendment because the diversity of state settlement
laws conflicts with the federal interest in a uniform liability
scheme for interstate carriers.
[2] In determining whether federal law should preempt
state law, the Supreme Court has instructed that “matters left
unaddressed in [a comprehensive and detailed statutory
scheme] are presumably left to the disposition provided by
state law.” O’Melveny & Myers v. F.D.I.C., 512 U.S. 79, 85
(1994); see also Wyeth v. Levine, 129 S. Ct. 1187, 1194-95
(2009). Beginning with that presumption, courts should con-
sider the purpose of Congress in enacting the federal statute
at issue, id. (“the purpose of Congress is the ultimate touch-
stone in every preemption case”), and determine whether
“there is a significant conflict between some federal policy or
interest and the use of state law.” O’Melveny & Myers, 512
U.S. at 87.
902 MASON AND DIXON v. LAPMASTER INTERNATIONAL
A. The Federal Interest in a Uniform National Liabil-
ity Policy for Interstate Carriers Is Designed to
Ensure That Carriers May Predictably Assess Risk
and Set Rates Accordingly.
[3] The Carmack Amendment to the Interstate Commerce
Act was enacted in 1906 to relieve the inconsistent outcomes
caused by a patchwork of state laws governing a carrier’s lia-
bility for damage to goods in interstate carriage. See Adams
Express Co. v. Croninger, 226 U.S. 491, 505 (1913). Before
Carmack, the diversity of state law causes of action and limi-
tations on liability related to these damages was such “that it
was practically impossible for a shipper engaged in a business
that extended beyond the confines of his own state, or a car-
rier whose lines were extensive, to know . . . what would be
the carrier’s actual responsibility as to goods delivered to it
for transportation from one state to another.” Id.
[4] In Southwest Express Co. v. Pastime Amusement, the
Court articulated the purpose of Congress in creating a uni-
form national liability scheme for interstate carriers, stating
“[t]he underlying principle is that the carrier is entitled to base
rates upon value and that its compensation should bear a rea-
sonable relation to the risk and responsibility assumed. The
broad purpose of the federal act is to compel the establish-
ment of reasonable rates and provide for their uniform appli-
cation.” 299 U.S. 28, 29 (1936) (citations omitted). To this
end, in Adams, the Supreme Court held that the Carmack
Amendment preempts all state and common law claims for
relief against a carrier for damage to goods in interstate car-
riage, regardless of whether those claims contradict or supple-
ment Carmack relief. See Charleston & W.C. Ry. Co. v.
Varnville Furniture Co., 237 U.S. 597, 604 (1915) (finding
that a $50 fine imposed by South Carolina law upon carriers
who fail to timely report damage was preempted by Car-
mack); Hughes Aircraft Co. v. N. Am. Van Lines, Inc., 970
F.2d 609, 613 (9th Cir. 1992) (holding that the Carmack
Amendment preempts all state law tort and contract actions
MASON AND DIXON v. LAPMASTER INTERNATIONAL 903
against a common carrier for damage to goods in interstate
commerce).
[5] The limitations of Carmack preemption illustrate that
the federal interest in establishing a uniform liability policy
does not extend beyond ensuring a carrier’s predictable maxi-
mum liability. In upholding a generally applicable Texas stat-
ute under which a Carmack plaintiff was awarded attorneys’
fees, the Court held that states may maintain laws that do not
“in anywise either enlarge or limit the responsibility of the
carrier for the loss of property intrusted to it in transportation,
and only incidentally affect[ ] the remedy for enforcing that
responsibility.” Mo., K&T, Ry. Co. of Tex. v. Harris, 234 U.S.
412, 420, 34 S. Ct. 790, 58 L. Ed. 1377 (1914). The Court
went on to note that the Texas statute was not inconsistent
with the Carmack Amendment in that it did not affect a ship-
per’s “ground of recovery, or the measure of recovery”
against a carrier for goods damaged in interstate carriage. Id.
at 421-422. “[T]he Court concluded that whatever burden was
thereby placed upon commerce was overbalanced by the
importance of the statute to the state’s policy of offering an
incentive to the prompt settlement of small but well-founded
claims and as a deterrent of groundless defenses.” A.T. Clay-
ton & Co., Inc. v. Missouri-Kansas-Texas, R. Co., 901 F.2d
833, 834-35 (10th Cir. 1990) (citing Harris, 234 U.S. at 421);
cf. Accura Sys., Inc. v. Watkins Motor Lines, Inc., 98 F.3d
874, 877 (5th Cir. 1996) (holding that Carmack Amendment
preempts Texas attorneys fees’ statute with no limit on fees,
distinguishing Clayton and Harris because those cases
involved limited fee recovery, and did not present a “poten-
tially unlimited recovery of attorneys’ fees”).
[6] Excluding from the scope of Carmack preemption a
generally applicable statute designed to encourage settlement
that “only incidentally affects” a shipper’s recovery from a
carrier is in keeping with the purpose stated in Southwest
Express that carriers be able to “base rates upon value” and
that a carrier’s “compensation should bear a reasonable rela-
904 MASON AND DIXON v. LAPMASTER INTERNATIONAL
tion to the risk and responsibility assumed.” 299 U.S. at 29.
When a carrier receives goods for interstate transportation, the
carrier can assess the value of those goods, predict its liability
with certainty based on “actual loss,” and set a rate based on
the risk and responsibility assumed. The only information
required to set that rate are the value of the goods and the car-
rier’s maximum liability for carrying them. To the extent that
the additional burden of a generally applicable state law does
not appreciably affect a shipper’s grounds for or measure of
recovery against a carrier, it cannot affect a carrier’s calculus
in setting rates, and therefore cannot conflict with Carmack’s
purpose.
B. California Good Faith Settlement Law Does Not
Conflict With the Federal Interest in a Uniform
Policy of Liability for Damages to Goods in Inter-
state Carriage.
[7] State settlement laws conflict with the Carmack
Amendment only to the extent that those laws “enlarge or
limit the responsibility of the carrier” for damages to the ship-
per. Harris, 234 U.S. at 420; see also Varnville Furniture Co.,
237 U.S. at 604. There is no evidence nor any contention by
any party that California Code of Civil Procedure sections
877 and 877.6 could increase MDII’s liability in excess of the
maximum damages prescribed by Carmack, or limit the ship-
per’s recovery to less than the actual value of the damage to
the machines. Much like the attorneys’ fees statute at issue in
Harris, sections 877 and 877.6 are generally applicable, do
not affect a shipper’s “ground of recovery, or the measure of
recovery” against a carrier, and are important to California’s
“strong public policy . . . to encourage the voluntary settle-
ment of litigation.” Harris, 234 U.S. at 421-422; Osumi v.
Sutton, 151 Cal. App. 4th 1355, 1359-60 (2007); see also A.T.
Clayton & Co., Inc., 901 F.2d at 834-35 (citing Harris, 234
U.S. at 421). Regardless of the settlement law applied, Lap-
master and Hartford have only a single, strict liability cause
of action under the Carmack Amendment against MDII for
MASON AND DIXON v. LAPMASTER INTERNATIONAL 905
damages to the machines under which they can collect no
more than $804,693.18; and MDII cannot be held liable for
those damages in excess of $804,693.18.
[8] The Carmack Amendment does not show a preference
for any particular approach to partial settlement because no
regime conflicts with the statute’s goal of ensuring that carri-
ers can “assess their risks and predict their potential liability
for damages.” Suarez v. United Van Lines, 791 F. Supp. 815,
817 (D. Colo. 1992) (citing Hughes v. United Van Lines, 829
F.2d, 1407, 1415 (7th Cir. 1987)). A carrier’s net liability for
damages after recovery from third parties based on their rela-
tive culpability does not depend on the legal mechanism by
which a carrier may recover, but rather the extent of the third
party’s culpability and that party’s preference for settlement.
Under any settlement regime, these variables are unpredict-
able, and therefore cannot affect a carrier’s ability to set rates.
Consequently, the application of diverse state settlement laws
in Carmack Amendment cases does not threaten the federal
interest in a uniform national scheme that allows carriers to
set their rates based on predictable liability for damages to
goods in interstate carriage. Federal law does not therefore
preempt state law, and California Code of Civil Procedure
sections 877 and 877.6 applies.
III. The District Court Did Not Err in Applying Cal.
Civ. Proc. Code §§ 877 and 877.6 Because MDII and
ITG Are Joint Tortfeasors.
MDII argues that sections 877 and 877.6 should not apply
to bar MDII’s indemnity claims against ITG because MDII
and ITG are not “joint tortfeasors” within the meaning of
those statutes. MDII’s argument is unpersuasive, and mostly
rests on the misconception that a claim under the Carmack
Amendment is somehow not a claim for damages in tort.
[9] MDII and ITG are joint tortfeasors, at least for pur-
poses of the bar to claims for equitable indemnity under sec-
906 MASON AND DIXON v. LAPMASTER INTERNATIONAL
tion 877, because they are each liable to Lapmaster and
Hartford for a detriment caused by the breach of a duty. See
BFGC Architects Planners, Inc. v. Forcum/Mackey Constr.,
Inc., 119 Cal. App. 4th 848, 852, 14 Cal. Rptr. 721 (2004).
Both parties owed a duty to Lapmaster and Hartford related
to the transportation of the machines. It is undisputed that ITG
owed a duty of reasonable care under state law. MDII owed
a duty governed by strict liability under the Carmack Amend-
ment. See Georgia, Florida, & Atlantic Ry. v. Blish Milling
Co, 241 U.S. 190, 196, 36 S. Ct. 541, 60 L. Ed. 948 (1916)
(explaining that the Carmack Amendment covers “all losses
resulting from any failure to discharge a carrier’s duty as to
any part of the agreed transportation”).
MDII argues that “any party liable solely under a statute is
not a tortfeasor subject to the provisions of [sections 877 and
877.6].” However, California courts have held that strictly lia-
ble defendants may be held responsible as joint tortfeasors
alongside negligent defendants. See Safeway Stores, Inc. v.
Nest-Kart, 21 Cal. 3d 322, 330, 146 Cal. Rptr. 550 (1978)
(“Nothing in the rationale of strict [ ] liability conflicts with
a rule which apportions liability between a strictly liable
defendant and other responsible tortfeasors.”); BFGC Archi-
tects, 119 Cal. App. 4th at 852 (“strict liability . . . may sus-
tain application of equitable indemnity”) (citing Daly v. Gen.
Motors Corp., 20 Cal. 3d 725, 737, 144 Cal. Rptr. 380
(1978)).
[10] Because MDII and ITG are joint tortfeasors under
California law, the district court did not err in applying Cal.
Civ. Proc. Code §§ 877 and 877.6 to bar MDII from asserting
claims for indemnity and contribution against ITG after the
District Court granted the motion to dismiss the claims pursu-
ant to a good faith settlement.
MASON AND DIXON v. LAPMASTER INTERNATIONAL 907
IV. The District Court Did Not Err In Concluding That
the Settlement Between ITG, Lapmaster, and Hart-
ford Satisfied the Good Faith Settlement Require-
ment of § 877.6.
To determine whether a settlement has been made in good
faith, California courts consider (1) “a rough approximation
of plaintiffs’ total recovery and the settlor’s proportionate lia-
bility”; (2) “the amount paid in settlement”; (3) “the alloca-
tion of settlement proceeds among plaintiffs”; and (4) “a
recognition that a settlor should pay less in settlement than he
would if he were found liable after a trial.” Tech-Bilt, 38 Cal.
3d at 499. The California Supreme Court also held that
“[o]ther relevant considerations include the financial condi-
tions and insurance policy limits of settling defendants, as
well as the existence of collusion, fraud, or tortious conduct
aimed to injure the interests of non-settling defendants.” Id.
[11] The key facts in this case are that (1) ITG provided
MDII with erroneous information on the “import dispatch”
regarding the size of the machines and the proper equipment
required to safely transport them; (2) an MDII driver, even
after seeing the size of the machines, continued to load one
machine onto his improperly equipped truck and proceeded to
damage it by hitting a freeway overpass; and (3) a second
MDII driver who did not depart the port until the next day
was not alerted to the problems faced by the first driver, and
proceeded to damage the second machine in exactly the same
manner as the first. Under these facts, it is not unreasonable
to conclude that MDII was responsible for the overwhelming
majority of damage to the machines.
[12] Furthermore, the district court had earlier ruled that
ITG’s liability to Lapmaster and Hartford was limited to
$200,000, and ITG settled with Lapmaster and Hartford for a
total of $150,000 with $80,000 to be allocated to Lapmaster
and $70,000 to Hartford. The district court’s order demon-
strates that it considered all of the above facts in addition to
908 MASON AND DIXON v. LAPMASTER INTERNATIONAL
MDII’s argument that ITG was still exposed to same degree
of liability as MDII. The district court did not abuse its discre-
tion in determining that the settlement between ITG, Lap-
master, and Hartford was made in good faith.
AFFIRMED.