Hairston Motor Co. v. Newsome

Present: All the Justices

HAIRSTON MOTOR COMPANY
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
v. Record No. 960664 JANUARY 10, 1997

WILLIAM E. NEWSOME, JR.,
T/A EDCO, ET AL.

FROM THE CIRCUIT COURT OF THE CITY OF DANVILLE
James F. Ingram, Judge

In this appeal, we consider the application of the provision

in federal law governing the liability of common carriers arising

under receipts or bills of lading, commonly known as the Carmack

Amendment, formerly 49 U.S.C. § 11707, to the determination of
1
proper venue for an action filed in state court. Finding that

federal law provided the exclusive remedy for the loss alleged,

the trial court construed the venue provisions within the Carmack

Amendment to require dismissal of the action for lack of proper

venue within Virginia. For the following reasons, we will

reverse the judgment of the trial court and remand the case for

further proceedings.

I. BACKGROUND

In raising an objection to venue, the burden rests with the

defendants to show that venue is improperly laid. Texaco, Inc.

v. Oaks, 214 Va. 676, 677-78, 204 S.E.2d 250, 251 (1974); Hodgson

v. Doe, 203 Va. 938, 942, 128 S.E.2d 444, 446 (1962). Here,

because the defendants have offered no evidence contradicting the

1
A general revision of the Interstate Commerce Act took
effect January 1, 1996. See P.L. 104-88, Title I, § 102(a), 109
Stat. 804 (1995). Liability under bills of lading is now
controlled by 49 U.S.C. § 14706.
factual allegations in the motion for judgment, we will accept

those allegations as true for purposes of resolving the issue

presented on appeal.

Hairston Motor Company (Hairston) operates a Volvo

automobile dealership in Danville. Beginning in 1992, Volvo

International began auctioning program and demonstrator vehicles

to its dealers. Hairston regularly attended these auctions in

Manheim, Pennsylvania, purchasing vehicles and contracting with

Flynn Transport, Inc. (Flynn), which is based in Towanda,

Pennsylvania, to transport the vehicles from Manheim to Danville.
On July 22, 1993, Hairston purchased 18 vehicles at an

automobile auction in Manheim. It contracted with Flynn to

deliver the vehicles to Danville. Flynn then engaged the

services of William E. Newsome, Jr., trading as EDCO (Newsome), a

resident of Fredericksburg, to deliver nine of the vehicles under

Flynn's contract with Hairston. 2 Newsome maintained a cargo

insurance policy with Northland Insurance Company (Northland).

Northland has a registered agent for service of process in

Richmond.

While en route to Danville, Newsome was involved in a single

vehicle accident in which three of the vehicles he was

transporting were damaged. Newsome delivered the undamaged

vehicles to Hairston and turned the damaged vehicles over to
2
Flynn denied in its answer, and continues to deny on
appeal, the allegation that Newsome was acting as its agent
rather than as an independent contractor directly responsible to
Hairston. Because the proceedings in the trial court did not
reach the factual merits of this claim, we express no opinion on
this issue.
Northland for adjustment. Northland later sold two of the

vehicles and has not paid any claim on the vehicles. One sale

was made in Chesapeake, Virginia.

On July 14, 1994, Hairston filed a motion for judgment

against Flynn, Newsome, and Northland (collectively, the

defendants), alleging that Flynn and Newsome had breached their

contracts by failing to deliver the three vehicles, and that

Northland had unlawfully converted the vehicles by selling two of

them without Hairston's consent.
The defendants filed numerous responsive pleadings including

substantially similar pleadings styled "OBJECTION TO VENUE AND

MOTION TO TRANSFER." The defendants asserted that Hairston's

claims under state common law were preempted by application of

the Interstate Commerce Act (the Act), which provides the

exclusive remedy for liabilities incurred as a result of a common

carrier providing transportation or service subject to the

jurisdiction of the Interstate Commerce Commission. The

defendants further asserted that the provisions of the Carmack

Amendment of the Act required that the suit be brought "in the

judicial district in which such loss or damage is alleged to have

occurred," superseding the state venue statutes. Identifying the

physical damage to the vehicles resulting from Newsome's accident

as the "loss or damage" upon which liability was predicated, the

defendants averred that venue would lie in Pennsylvania. 3
3
Although there is some factual dispute over the precise
location of the accident, the record supports the conclusion, and
for purposes of our analysis we will assume, that the accident
occurred in Pennsylvania.
 In the alternative, the defendants asserted that, even if

the provisions of the Carmack Amendment did not supersede state

venue statutes, Pennsylvania was nonetheless a more convenient

forum for the litigation. In various other motions, the

defendants demurred to the claims of the suit and sought

dismissal on various grounds including res judicata, citing a

prior federal suit arising out of the same factual circumstances.

After receiving briefs and hearing oral argument from the

parties, the trial court dismissed the suit for lack of venue.

Specifically, the trial court held "that the Carmack Amendment

. . . is the applicable law governing this matter and . . . that

the City of Danville is not a proper location for the trial of

this matter under the provisions of Title 49, United States Code,

Section 11707(d)(2)(A)(iii)." The final order made no provision

for transfer of the proceeding. While noting that the "matter

came on to be heard upon Defendants' Demur[rer]s and numerous

Motions to Dismiss," the trial court did not address any issue

other than the objection to venue based on the Carmack Amendment.

We awarded Hairston this appeal, limited to the venue issues.
I. SCOPE OF FEDERAL PREEMPTION

Resolution of the venue issues upon which an appeal has been

awarded in this case requires consideration of two questions: (1)

whether federal law in fact controls the merits of the claims,

and, if so, (2) whether the venue provisions of the applicable

federal law compel dismissal here.

A. Preemption of Claims Against Common Carriers

Exercising its authority under the Commerce Clause, Article
I, Section 8, Clause 3 of the United States Constitution, the

federal government has retained for itself the power to regulate

and supervise the activities of common carriers operating across

state lines. The principal medium for enforcing this authority

has been the Interstate Commerce Act. In 1906, legislation which

has become known as the Carmack Amendment included in the Act

provisions for liability of common carriers arising under

receipts or bills of lading.
Although the carrier is not an insurer under the Carmack

Amendment, the shipper "need only prove, in essence, that the

goods were received by the carrier at the point of origin but

were delivered at the destination in a damaged condition or with

a portion or all of the goods missing. The liability [of the

carrier] arises under a theory similar to res ipsa loquitur."

United States v. Seaboard Coastline Railroad, 384 F.Supp. 1103,

1106-07 (E.D. Va. 1974)(citation omitted) (emphasis added).

In Adams Express Company v. Croninger, 226 U.S. 491 (1913),

the United States Supreme Court determined that the Carmack

Amendment superseded all state regulation with respect to claims

arising out of such liability. Id. at 505-06; see also Manieri

v. Seaboard Air Line Railway Co., 147 Va. 415, 420, 137 S.E. 496,

498 (1927).

Since state courts have concurrent jurisdiction over claims

controlled by the Carmack Amendment, see Missouri, Kansas & Texas

Ry. v. Harris, 234 U.S. 412, 421 (1914), a case against common

carriers asserting liability for loss or damage may properly be

heard in the Virginia circuit court on the merits, applying
federal law.

B. The Claim Against Northland Insurance

The motion for judgment alleges that Northland received

damaged vehicles from Newsome "to either repair or to pay

Hairston Motor Company for them." It further alleges that

Northland did not repair or pay for the vehicles, but sold two of

the vehicles. One of the sales allegedly occurred in Virginia.

Based upon these allegations, Hairston asserted a claim for

common law conversion against Northland. Nevertheless, Northland

has asserted that the Carmack Amendment precludes claims against

an interstate carrier's insurance company in these circumstances.

We disagree.
By its express terms, the Carmack Amendment applies only to

the liability of a "common carrier" under a "receipt or bill of

lading." 49 U.S.C. § 11707(a)(1)(now 49 U.S.C. § 14706(a)(1)).

Northland is not a common carrier, see former 49 U.S.C.

§ 10102(4); see also 49 U.S.C. § 13102(12), nor is Hairston's

action for conversion of property premised on a receipt or bill

of lading.

An allegation of the tort of conversion asserts a "wrongful

exercise or assumption of authority . . . over another's goods,

depriving him of their possession; [and any] act of dominion

wrongfully exerted over property in denial of the owner's right,

or inconsistent with it." Universal C.I.T. Credit Corp. v.
Kaplan, 198 Va. 67, 75, 92 S.E.2d 359, 365 (1956). While

Northland may have initially acquired possession of the vehicles

from its insured during the course of an interstate shipment,
Hairston's common law claim for conversion does not arise from

the transportation or damage of the property, or even under the

contract of insurance between Newsome and Northland. Common law

claims not superseded by the Carmack Amendment are preserved

under the Act. See former 49 U.S.C. § 10103. Common law claims

not premised on transportation or damage by carriers and not

arising from a receipt or bill of lading are preserved under the

Act. See Sokhos v. Mayflower Transit, Inc., 691 F. Supp. 1578,

1581-82 (D. Mass. 1988). Accordingly, we hold that the trial

court's determination that the claim against Northland is

preempted by federal law was in error, and dismissal of the

action for violation of the federal venue provision was likewise
4
in error.
C. Claims Against Flynn and Newsome

Hairston has asserted in a one-count motion for judgment

that Flynn and Newsome breached their contracts to deliver the

vehicles to Danville. While Hairston's allegations did not cite

federal liability standards, and indeed were pled solely ex
contractu, they are indisputably claims against common carriers

arising from loss or damage of goods in interstate

transportation. Hence, they are controlled by federal law, which

preempts state regulation of liability in such circumstances.

Croninger, 226 U.S. at 505-06.

For example, with respect to Flynn, it is specifically

4
Because the trial court did not address the issue of venue
under Virginia's venue statutes with respect to Hairston's claim
against Northland, we express no opinion as to that issue.
alleged that this defendant in its capacity as a common carrier

contracted to deliver eighteen vehicles received in Manheim,

Pennsylvania, and that "[f]ifteen of the eighteen motor vehicles

which Flynn Transport, Inc. was engaged to deliver to Danville,

Virginia were delivered. Three motor vehicles were not." It is

further asserted that the value of the three vehicles not

delivered was $53,525. With respect to Newsome, the motion for

judgment alleges that Flynn "engaged" Newsome in his capacity as

a common carrier to deliver nine of the eighteen vehicles, that

after damaging three of the vehicles, Newsome turned the vehicles

over to Northland, and that Newsome breached his contract "as a

connecting carrier to deliver nine motor vehicles to Hairston

Motor Company in Danville, Virginia." Although describing

Newsome as a "connecting carrier," the factual averments

expressly state that Newsome was also the delivering carrier of

the nine vehicles he contracted with Flynn to deliver to

Hairston.
We find, therefore, that Hairston's claims fall squarely

within the subject matters in which common law claims are

preempted, and to which federal carrier liability standards apply

under the Carmack Amendment.

The issue upon which an assignment of error was granted is

limited to the application of venue standards, rather than the

sufficiency of plaintiff's motion for judgment to state a prima
facie claim under the applicable federal standards. Hence, we

turn to the question whether the venue provisions of the federal
statute preclude proceedings in Danville. 5

III. VENUE WHERE THE CARMACK AMENDMENT CONTROLS

The venue provisions of the Carmack Amendment pertinent to

this appeal are found at former 49 U.S.C. § 11707:
. . . .

(d)(1) A civil action under this section may be
brought against a delivering carrier (other than a rail
carrier) in a district court of the United States or in
a State Court. Trial, if the action is brought . . .
in a State court, is in a State, through which the
defendant carrier operates a . . . route.
(2)(A) A civil action under this section may only
be brought--

. . . .

(iii) against the carrier alleged to have caused
the loss or damage, in the judicial district in which
such loss or damage is alleged to have occurred.

Clearly, under this statute venue in claims brought in a

state court against a delivering carrier must be laid in a state

through which the carrier “operates a . . . route,” and a civil

action against a carrier causing loss or damage to the cargo must

be brought in the judicial district where “loss or damage is

alleged to have occurred.”

Flynn and Newsome assert that Hairston's claim is predicated

upon the structural harm to, and resulting diminution in value

of, the vehicles caused by Newsome's accident, and that this is
5
The motion for judgment pled (1) that Hairston tendered the
vehicles in good condition, (2) that three of the vehicles were
not delivered, and (3) that Hairston suffered a loss as a result.
These elements arguably state a viable claim under the Carmack
Amendment. See Missouri Pacific Railroad Co. v. Elmore & Stahl,
377 U.S. 134, 137-38 (1964); see also Continental Grain Co. v.
Frank Seitzinger Storage, Inc., 837 F.2d 836, 839 (8th Cir.
1988).
the "loss or damage" referenced by subsection (d)(2)(A)(iii) of

the statute. They further assert that the "loss or damage"

occurred in Pennsylvania rather than in Virginia and, thus, they

argue that the statute mandates that the action be tried in

Pennsylvania. We disagree.

First, these defendants disregard the fact that the damaged

vehicles were not delivered to Hairston. Hairston's motion for

judgment asserts a claim, alternately against each carrier, that

they are liable because of failure to deliver in Danville all the

vehicles consigned to them. This breach of the carriers' duty,

and its associated loss to Hairston, occurred in Danville rather

than in Pennsylvania. Accordingly, venue in Danville is

consistent with the mandate of subsection (d)(2)(A)(iii) of the

federal statute.
Second, we reject the defendants' assertion that venue is

improper in Danville for lack of a showing that defendants

"operate a . . . route" through Virginia as required by

subsection (d)(1), since their liability is predicated on one or

the other of them being the "delivering carrier."

We are not persuaded that the Carmack Amendment's provisions

for venue are to be so narrowly construed as to mean that a

carrier may only be subject to suit in a state through which it

maintains regularly scheduled or published routes. Rather, we

construe them to require simply that an interstate carrier, other

than a rail carrier, is subject to suit only in a state through

which it actually transports property. Here, the motion for

judgment expressly avers that both Flynn and Newsome contracted
to transport vehicles within Virginia, that Flynn had delivered

vehicles into Virginia in the past, and that both Flynn and

Newsome actually delivered vehicles in Virginia in the current

instance. Defendants have not controverted these facts.

We hold that on the facts as pled, these carriers operated a

route through Virginia as contemplated by subsection (d)(1) of

the federal Act. For these reasons, we further hold that

Danville is a permissible venue with respect to the claims

against Flynn and Newsome, and that the trial court erred in

dismissing the action against them on venue grounds.
Accordingly, we will reverse the judgment of the trial court

and remand the case for further proceedings.

Reversed and remanded.