Seaside Inland Transport et al v. Coastal Carriers LLC et al, No. 2:2017cv00143 - Document 114 (E.D. Wash. 2018)
Court Description: ORDER DENYING ECF No. 96 PARTIAL SUMMARY JUDGMENT. Signed by Judge Salvador Mendoza, Jr. (TR, Case Administrator)
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ssion of 11 $109,828.00 on these uncollectable freight bills. Id. 12 On May 30, 2017, Coastal asserted a counterclaim and third-party claim of 13 breach of contract under the Liability Clause and Credit Clause. 4 ECF No. 9. It 14 argues that Seaside, as well as its alter-ego Massingill and Service Driven, have 15 refused to pay the amount it is owed: $742,306.67 in uncollected freight charges 16 and $109,828.00 in commission reimbursement. Id. III. 17 DISCUSSION Movants argue that Coastal’s claim is barred by: (1) Washington’s Uniform 18 19 20 4 Coastal also claimed a violation of the Computer Fraud and Abuse Act, which is not the subject of this partial summary judgment motion. ECF No. 9 at 7–8. ORDER DENYING PARTIAL SUMMARY JUDGMENT - 6 1 Business Organizations Code, (2) the Statute of Frauds, (3) the equitable doctrine 2 of estoppel, and (4) the lack of evidence of breach under the Liability Clause and 3 Credit Clause. ECF No. 96. The Court addresses these arguments in turn. 4 A. Washington’s Uniform Business Organizations Code 5 A foreign entity doing business in Washington “may not maintain an action 6 or proceeding in this state unless it is registered to do business in [the] state and has 7 paid [] [the] state all fees and penalties for the years, or parts thereof, during which 8 it did business . . . without having registered.” Wash. Rev. Code (“RCW”) 9 23.95.505(2). “Proceeding” includes a civil suit. RCW 23.95.105(29). Moreover, 10 this rule applies to a foreign entity’s successor. RCW 23.95.505(3). 11 Movants argue that because Coastal has failed to register as a foreign entity 12 doing business in Washington, it may not maintain a proceeding in the state. They 13 request a stay of proceedings until Coastal registers. 14 Coastal responds that Movants failed to assert this affirmative defense in their 15 responsive pleading and thus, waived it. ECF No. 108 at 7. Coastal alternatively 16 argues that it engaged in interstate commerce by using independent contractors and 17 so, was not subject to the registration requirement. Id. 18 1. Waiver 19 The Court rejects the waiver argument. While state law defines the nature of 20 an affirmative defense in a diversity action, the Federal Rules of Civil Procedure ORDER DENYING PARTIAL SUMMARY JUDGMENT - 7 1 provide the manner and time in which the defense is raised and when waiver occurs. 2 Healy Tibbitts Constr. Co. v. Ins. Co. of N. Am., 679 F.2d 803, 804 (9th Cir. 1982) 3 (per curiam). 4 The Ninth Circuit “liberalized” the requirement that affirmative defenses be 5 raised in an initial pleading: the failure to assert an affirmative defense in the initial 6 pleading does not necessarily waive the defense. Rivera v. Anaya, 726 F.2d 564, 7 566 (9th Cir. 1984) (allowing the defendant to raise the statute of limitations defense 8 for the first time in a summary judgment motion); see also Healy Tibbitts, 679 F.2d 9 at 804 (holding that absent prejudice, a party may raise an affirmative defense in a 10 summary judgment motion). Here, Coastal does not claim prejudice. Therefore, the 11 waiver argument is unavailing. 12 2. Doing business in Washington 13 A foreign entity does not “do business” in Washington when it sells through 14 independent contractors or does business in interstate commerce. RCW 15 23.95.520(1)(e) and (1)(f). Coastal argues that several facts support its argument 16 that it did not do business in Washington: (1) it is based in Missouri, (2) it engaged 17 in interstate commerce by using independent contractors throughout the country, 18 (3) it did not have employees in Washington, and (4) it does not have any offices or 19 property in the state. ECF No. 108 at 7. 20 ORDER DENYING PARTIAL SUMMARY JUDGMENT - 8 1 These facts, Coastal seems to argue, ipso facto lead to the conclusion that it 2 falls under the exceptions in RCW 23.95.520(1)(e) and (1)(f). The Court disagrees. 3 For example, Coastal fails to explain, through legal authority or any argument, why 4 it should be considered a “seller” under RCW 23.95.520(1)(e). Moreover, just 5 because it did not have employees or offices, or its principal place of business in 6 Washington, does not mean that it was engaged in interstate commerce; in such 7 cases, then, almost all “foreign” entities would automatically fall under this 8 exception. See RCW 23.95.105(10) (defining “foreign” as being governed by the 9 law of another jurisdiction). Because Coastal fails to meet its shifted burden, the 10 Court concludes that allowing it to proceed under state law is improper. 11 Accordingly, the Court stays Coastal’s counterclaim and third-party claim against 12 Movants until it obtains a certificate of registration. See RCW 23.95.505(4). 13 B. Washington Statute of Frauds 14 Movants argue that the Washington Statute of Frauds precludes Coastal from 15 claiming breach of contract because Seaside signed no writing. ECF No. 96 at 14. 16 In response, Coastal argues that there was a novation, or a new contractual relation, 17 between Seaside and Coastal. ECF No. 48 at 10. A novation “may be either the 18 substitution of a new obligation for an old one between the same parties with intent 19 to displace the old obligation with the new, or the substitution of a new debtor for 20 the old one with intent to discharge the old debtor, or the substitution of a new ORDER DENYING PARTIAL SUMMARY JUDGMENT - 9 1 creditor with intent to transfer the rights of the old creditor to the new.” Macpherson 2 v. Franco, 34 Wn. 2d 179, 182 (1949). 3 Indeed, as evidence of novation, Seaside continued to operate under the terms 4 of the Agreement, and received its commission accordingly. Its own attorney, in a 5 letter to Mr. Dunard following the termination of Seaside and Coastal’s business 6 relationship, cited to the Agreement as having been in effect for fifteen years up 7 until March 13, 2017. ECF No. 50 at 11. Additionally, Massingill signed the 8 Agreement himself, “DBA Seaside Inland Transport.” As such, the Agreement was 9 a sufficient writing, and Movants cannot assert the Statute of Frauds defense.5 10 C. Equitable Estoppel 11 Movants claim that equitable estoppel applies because Seaside brokered 12 Bonerts’ shipments only as expressly directed by CCI. ECF No. 112 at 9. Under 13 Local Rule 56.1(d), the Court may assume that Movants’ facts are uncontroverted 14 if Coastal does not file, separately from the memorandum of law, the specific facts 15 that establish a genuine dispute. Here, Coastal did not file a separate statement of 16 facts to clarify or dispute any of Movants’ facts and as such, the Court accepts 17 Movants’ facts without controversy. 6 18 5 19 20 In any case, Movants fail to establish that a writing was even required under the Washington Statute of Frauds. 6 Coastal cites its previously-submitted Statement of Facts, ECF No. 49, in opposition to a previous partial summary judgment motion. However, the Court has already stricken that partial summary judgment motion, which struck the linked ORDER DENYING PARTIAL SUMMARY JUDGMENT - 10 1 Equitable estoppel requires: (1) an admission, statement, or act inconsistent 2 with a claim afterward asserted; (2) action by another in reasonable reliance on that 3 act, statement, or admission; and (3) injury to the relying party if the Court allows 4 the first party to contradict or repudiate the prior act, statement, or admission. 5 Robinson v. City of Seattle, 119 Wash. 2d 34, 82 (1992). Because estoppel is not 6 favored, the party asserting estoppel must prove each element by clear, cogent and 7 convincing evidence. Colonial Imps., Inc. v. Carlton Nw., Inc., 121 Wash. 2d 726, 8 734 (1993). 9 Here, the evidence in the record shows that (1) Coastal authorized Seaside to 10 broker Bonerts’ freight, and (2) Seaside did so accordingly in reliance on Coastal’s 11 instruction. However, (3) Movants can’t show injury. Coastal does not claim that it 12 was Seaside’s act of brokering freight for Bonerts that makes Seaside liable— 13 instead, it was Seaside’s breach of the Liability Clause or Credit Clause. In other 14 words, while the Court agrees with Movants that Coastal may not challenge 15 Seaside’s act of brokering Bonerts’ freight, it is not doing so here and thus, is not 16 estopped from asserting its breach of contract claim. Coastal still has to prove such 17 a breach. Therefore, the Court rejects the equitable estoppel argument. 18 D. Evidence of breach of the Liability Clause or Credit Clause 19 20 documents as well. ECF No. 55 at 6 (“Because the Court’s decision on the instant motion could materially change the analysis of the parties’ summary judgment arguments, the Court strikes the summary judgment motion.”). ORDER DENYING PARTIAL SUMMARY JUDGMENT - 11 1 Lastly, Movants make the final argument that Coastal failed to produce 2 evidence of Seaside’s errors/omissions, or failure to secure CCI’s credit release, in 3 violation of the Liability Clause and Credit Clause, respectively. They argue 4 Seaside produced evidence that it secured CCI’s credit release for Bonerts in May 5 2012, and that CCI increased Bonerts’ credit limit in October 2015. ECF No. 96 at 6 16. 7 Coastal responds persuasively that this evidence does not establish as a 8 matter of law that Seaside is not liable for Bonerts’ debt, i.e., that it did not err or 9 omit. Evidence that Seaside secured CCI’s credit release during standalone periods 10 in time do not account for the entirety of the debt that Bonerts failed to pay. 11 Moreover, even with Seaside’s securement of CCI’s credit release, this does not 12 establish that Coastal did not subsequently err or omit. The two clauses are not 13 mutually exclusive. Because Seaside’s errors and omissions could have arisen after 14 securing credit release, the breach of contract could have arisen after that. Because 15 Movants fail to meet their burden to show that they are entitled to judgment as a 16 matter of law, partial summary judgment in their favor is denied. 17 Accordingly, IT IS HEREBY ORDERED: 18 1. 19 Seaside’s, Massingill’s, and Service Driven’s Motion for Partial Summary Judgment, ECF No. 96, is DENIED. 20 ORDER DENYING PARTIAL SUMMARY JUDGMENT - 12 1 2. Coastal’s counterclaim and third-party claim is STAYED until it 2 obtains a certificate of registration with the Washington Secretary of 3 State pursuant to RCW 23.95.505. No later than October 17, 2018, or 4 upon receipt of the certificate, whichever is sooner, Coastal shall file a 5 status report, along with a copy of the certificate and request to lift the 6 stay. If Coastal does not intend to obtain a certificate of registration, it 7 shall file by October 17, 2018 a motion for dismissal, or face 8 involuntary dismissal. 9 10 11 IT IS SO ORDERED. The Clerk’s Office is directed to enter this Order and provide copies to all counsel. DATED this 17th day of September 2018. 12 13 ________________________ SALVADOR MENDOZA, JR. United States District Judge 14 15 16 17 18 19 20 ORDER DENYING PARTIAL SUMMARY JUDGMENT - 13
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