Data Mfg., Inc. v. United Parcel Service, Inc., 08-1646.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Citation: 557 F.3d 849
• Docket Number: No. 08-1646.,08-1646.
• Parties: DATA MANUFACTURING, INC., a Missouri corporation, Appellant, v. UNITED PARCEL SERVICE, INC., an Ohio corporation, Appellee.
• Decision Date: 04 March 2009

557 F.3d 849 DATA MANUFACTURING, INC., a Missouri corporation, Appellant,
v.
UNITED PARCEL SERVICE, INC., an Ohio corporation, Appellee. No. 08-1646. United States Court of Appeals, Eighth Circuit. Submitted: October 16, 2008. Filed: March 4, 2009.

[557 F.3d 850]

Michael A. Wolff, James A. Schuchart, on the brief, St. Louis, MO, for appellant.

[557 F.3d 851]

Ruth N. Borenstein, argued, San Francisco, CA, Patrick J. Kenny, Jovita Foster, St. Louis, MO, Janelle J. Sahouria, San Francisco, CA, on the brief, for appellee.

Before GRUENDER, BEAM, and SHEPHERD, Circuit Judges.

BEAM, Circuit Judge.

Data Manufacturing, Inc. (DMI) appeals the district court's Rule 12(b)(6) dismissal of its lawsuit against United Parcel Service (UPS). We hold that all but one of DMI's claims are preempted by the Federal Aviation Administration Authorization Act of 1994, 49 U.S.C. § 14501(c)(1) (FAAAA). Accordingly, we reverse and remand for adjudication of DMI's sole surviving claim—that it did not agree to pay a $10 re-billing fee in its contract with UPS.

I. BACKGROUND

DMI manufactures retail gift and debit cards for customers, including First Data Corporation. First Data required DMI to use UPS as the shipper for any gift cards manufactured for First Data, and First Data initially agreed to pay all shipping charges. DMI had an open account with UPS and originally UPS would bill DMI weekly and then First Data would reimburse DMI for the amount attributable to shipping First Data's gift cards. In March 2005, however, DMI began to ship the cards using First Data's account number and the shipping charges were billed directly to First Data. At some point thereafter, First Data began to reject these UPS third-party billings. In turn, UPS charged DMI's account for First Data's rejected billings. DMI was not initially aware that First Data was rejecting the charges because the UPS billing statements did not include specific shipment information, but instead merely summarized hundreds of shipments.

DMI eventually learned that UPS was also adding a $10 charge for each billing rejected by First Data and then re-billed by UPS to DMI's account. This was included on the invoice in a category labeled "chargebacks," and this category also included various other charges. It did not specifically disclose the $10 per transaction re-billing charges. DMI did not discover these charges until August 2006. The re-billing charges, in excess of $350,000, actually exceeded the total cost of the shipments from March 2005 through August 2006 for the First Data gift cards.

DMI sued UPS in Missouri state court for the allegedly wrongful re-billing charges assessed by UPS, asserting claims for breach of contract, fraudulent and negligent misrepresentation, and money had and received. DMI also sought a declaration that the re-billing charges were void and against public policy. UPS removed the matter to federal court on the basis of diversity jurisdiction and filed a motion to dismiss, arguing that DMI's claims were pre-empted by the FAAAA. The district court agreed and dismissed the amended complaint.

II. DISCUSSION

We review de novo the district court's dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Benton v. Merrill Lynch & Co., Inc., 524 F.3d 866, 870 (8th Cir.2008). The factual allegations of a complaint are assumed true and construed in favor of the plaintiff, "even if it strikes a savvy judge that actual proof of those facts is improbable." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007).

In the FAAAA, Congress sought to equalize competition between air and motor carriers of property by uniformly preempting state economic regulation of their activities, but not preempting state

557 F.3d 852

safety regulations. Tow Operators Working to Protect Their Right to Operate on the Streets of Kansas City v. City of Kansas City, 338 F.3d 873, 874 (8th Cir.2003). The relevant preemption provision can be found in 49 U.S.C. § 14501(c)(1), which states:

Except as provided in paragraphs (2) and (3), a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier ... or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

49 U.S.C. § 14501(c)(1). So, if DMI's claims relate to UPS's prices, routes or services and derive from the enactment or enforcement of state law, they are preempted.

We begin with the inquiry into whether the basis for all of DMI's claims, the $10 re-billing charge, relates to a price, route or service of UPS. The Supreme Court has broadly interpreted the phrase "relating to" as encompassing all state laws having any connection with or reference to the carrier's rates, routes or services. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383-84, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) (construing a substantially similar provision in the Airline Deregulation Act (ADA)). This means that states cannot inflict their own public policies or regulations on a carrier's operations. Botz v. Omni Air Int'l, 286 F.3d 488, 495 (8th Cir.2002).

We find that the $10 charge is part of UPS's "operations" and falls into both the price and service categories. Certainly shipping is the main component of UPS's business and service, but it is disingenuous to suggest that UPS's billing procedures are not a necessary component of its business operations. DMI argues that there was no "service" here because the cost of re-assigning each of the numerous rejected billings was de minimus, and did not cost UPS $10 per transaction. However, regardless of how much it actually cost UPS to re-bill the shipping charges for each transaction, it is certainly part of its pricing and services to do so. While the work to re-bill may have been de minimus, it was still part of the UPS accounting department's operations to do so. DMI may be correct when it insists that UPS should have informed DMI...