City Cab Co. v. Edwards, Civ. No. 90-0171-P.

• Decision Date: 13 September 1990
• Docket Number: Civ. No. 90-0171-P.
• Citation: 745 F. Supp. 757
• Parties: CITY CAB CO., Don-Dee-Cin Corporation, Elizabeth McDonough, Town Taxi Co., and Sanford Taxi, Inc., Plaintiffs, v. Joseph T. EDWARDS, and, William G. Diamond, Defendants.
• Court: U.S. District Court — District of Maine

745 F. Supp. 757

CITY CAB CO., Don-Dee-Cin Corporation, Elizabeth McDonough, Town Taxi Co., and Sanford Taxi, Inc., Plaintiffs, v. Joseph T. EDWARDS, and, William G. Diamond, Defendants.

Civ. No. 90-0171-P.

United States District Court, D. Maine.

September 13, 1990.

Robert S. Hark, Isaacson & Raymond, Lewiston, Me., for plaintiffs.

Peter W. Brann, Asst. Atty. Gen., Augusta, Me., for defendants.

MEMORANDUM OF DECISION AND ORDER

GENE CARTER, Chief Judge.

This matter comes before the Court on Defendants' motion, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss Plaintiffs' Complaint for failure to state a claim upon which relief can be granted. The motion will be denied for the reasons set forth below.

I. BACKGROUND

Plaintiffs City Cab Co., Don-Dee-Cin Corporation (d/b/a Two-in-One Taxi), Town Taxi Co., Elizabeth McDonough (d/b/a ABC Taxi), and Sanford Taxi, Inc. operate taxi services in various municipalities under licenses or other certificates from the state of Maine. Plaintiffs participate in a "purchasing group" through which they obtain low-cost liability insurance for their businesses.¹

On May 16, 1990, Defendant G. William Diamond, Maine's Secretary of State, informed Plaintiffs by letter through a Deputy Secretary of State that their insurance carrier, Bel-Aire Insurance Company of St. Louis, Missouri, was no longer authorized to offer coverage in Maine. Defendant Joseph Edwards, Superintendent of Insurance for Maine, certifies companies authorized to provide insurance in Maine. The Secretary of State's letter implemented Public Law 1990, Chapter 724 (hereinafter P.L.1990, Chapter 724) which amends the Maine Liability Risk Retention Act to require that purchasing groups buy insurance from insurers licensed by Maine or from a licensed agent or broker acting pursuant to the surplus lines laws and regulations.² P.L.1990, ch. 724 (amending 24-A M.R.S.A. §§ 6097, 6099(1)). Plaintiffs' insurance carrier did not meet the requirements of the new enactment. As a result, Plaintiffs have been required by P.L.1990, Chapter 724 to obtain an alternative source for liability insurance or suffer the suspension of the state approval necessary to continue providing taxi service.

In the absence of relief from the amended statute, Plaintiffs allege that they will be forced by higher insurance premiums to cease or substantially reduce their taxi service operations. To avoid that result, Plaintiffs filed a complaint with the Court on July 18, 1990, seeking declaratory and injunctive relief from the implementation of P.L.1990, Chapter 724.³

Specifically, Plaintiffs argue that the new Maine statute both on its face and as applied in this instance is preempted by federal law and therefore cannot be enforced without offending the Supremacy Clause of the federal Constitution. U.S. Const. art. VI, cl. 2. Further, Plaintiffs complain that P.L.1990, Chapter 724 creates an arbitrary legal classification with no reasonable relationship to the purported legislative end thereby violating the Fourteenth Amendment to the United States Constitution. Defendants now move to dismiss the Complaint on the grounds that it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6).

II. MOTION TO DISMISS

A motion to dismiss under Rule 12(b)(6) tests the formal sufficiency of a plaintiff's pleadings and therefore must be considered in light of the liberal notice pleading requirements of the Federal Rules of Civil Procedure. Mladen v. Gunty, 655 F.Supp. 455, 457 (D.Me.1987) (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1356, at 590 (1969)).⁴ "A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). The Court is directed to accept as true all of the plaintiff's allegations and interpret all facts contained in the complaint most favorably to the plaintiff. See Miree v. De Kalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977).

The Complaint alleges that P.L.1990, Chapter 724 is preempted by the federal Product Liability Risk Retention Act of 1981, 15 U.S.C. § 3901 et seq. (the Risk Retention Act), and, as a result, enforcement of the state law violates the federal Constitution's Supremacy Clause. In particular, Plaintiffs assert that Maine's new requirement that purchasing groups buy insurance only from insurers admitted in Maine or from licensed surplus lines agents or brokers runs afoul of three provisions of the Risk Retention Act which exempt purchasing groups from certain restrictive state laws, rules, regulations, and orders.

Title 15 U.S.C. § 3903(a)(2) exempts purchasing groups from state laws which would "make it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages, based on their loss and expense experience, not afforded to other persons with respect to rates, policy forms, coverages, or other matters." Section 3903(a)(3) exempts purchasing groups from state laws which would "prohibit a purchasing group or its members from purchasing insurance on the group basis described in section 3903(a)(2)." Finally, section 3903(a)(8) prohibits any state law which would "otherwise discriminate against a purchasing group or any of its members."⁵

Plaintiffs make two arguments, which must be considered individually, regarding the alleged conflict between the state and federal statutes. First, Plaintiffs argue that P.L.1990, Chapter 724, on its face, is preempted by the above described provisions of the federal Risk Retention Act. Second, Plaintiffs argue that the protections for purchasing groups included in the Risk Retention Act are violated by P.L. 1990, Chapter 724 as-applied in this instance. Without a factual record before it, the Court cannot now say that no state of facts can exist which would support Plaintiffs' second argument.

III. PREEMPTION AND LEGISLATIVE HISTORY

A fundamental precept of the United States Constitution is that "any state law, however clearly within a State's acknowledged powers, which interferes with or is contrary to federal law, must yield." Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 1092, 8 L.Ed.2d 180 (1962). See Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 6 L.Ed. 23 (1824). To avoid an unnecessary or unwarranted disruption of the delicate balance between the constitutional mandate of federal supremacy and state sovereignty, analyses of federal statutes in fields traditionally occupied by the states begin with "the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947).

Congress may explicitly preempt state law in the statute's language or imply its preemptive intent in the statute's structure and purpose. Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977). In the absence of express preemptive language, Congress may legislate comprehensively, thereby occupying the field of regulation and leaving no room for state action. Rice, 331 U.S. at 230, 67 S.Ct. at 1152. Finally, a state law which actually conflicts with federal law is invalidated, such as when it may be impossible to comply with both state and federal law, or when state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). See also Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984).

Congress has certainly not occupied the field of regulation of the insurance industry. In 1945, Congress enacted the McCarran-Ferguson Act which expressly left regulation of the business of insurance to the states. 15 U.S.C. § 1011, et seq. The liability insurance crisis of the late 1970s and the resulting need to reduce insurance premiums for small businesses through federal action lead Congress to launch a limited intervention into state regulation through the Risk Retention Act of 1981. 15 U.S.C. §§ 3901-3904.

Before adopting the Risk Retention Act of 1981, Congress considered and rejected a comprehensive scheme of federal regulation of risk retention groups and purchasing groups. Insurance Co. of Pennsylvania v. Corcoran, 850 F.2d 88, 91 (2d Cir. 1988) (citing H.R.Rep. No. 190, 97th Cong., 1st Sess. 6-7, reprinted in 1981 U.S.Code Cong. & Admin.News 1432, 1435). Instead, Congress chose to encourage the formation of purchasing groups which enable insureds to buy lower-cost product liability insurance on a group basis and the creation of self-insuring "risk retention groups." H.R.Rep. No. 190, 97th Cong., 1st Sess. 4, reprinted in 1981 U.S.Code Cong. & Admin.News 1432, 1432.

Assessing whether there exists a conflict between state and federal statutes is "essentially a two-step process of first ascertaining the construction of the two statutes and then determining the constitutional question whether they are in conflict." Perez v. Campbell, 402 U.S. 637, 644, 91 S.Ct. 1704, 1708, 29 L.Ed.2d 233 (1971). Of course, when the language of the federal statute unambiguously precludes certain state legislation, no further analysis is necessary. Exxon Corp. v. Hunt, 475 U.S. 355, 362, 106 S.Ct. 1103, 1109, 89 L.Ed.2d 364 (1986). In the absence of an express mandate for preemption, the Court is directed to consult the legislative history, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 147, 83 S.Ct. 1210, 1220, 10 L.Ed.2d 248 (1963), having a particular sensitivity to the claims of congressional intent. United States v. Smith, 726 F.2d 852, 859 (1st Cir.1984).

A.

The express preemption of...