Starr Indem. & Liab. Co. v. YRC, Inc., Case No. 15-cv-6902

Decision Date26 December 2018
Docket NumberCase No. 15-cv-6902
CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
PartiesSTARR INDEMNITY & LIABILITY COMPANY a/s/o CESSNA AIRCRAFT COMPANY, Plaintiff, v. YRC, INC., Defendant.

STARR INDEMNITY & LIABILITY COMPANY
a/s/o CESSNA AIRCRAFT COMPANY, Plaintiff,
v.
YRC, INC., Defendant.

Case No. 15-cv-6902

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

December 26, 2018


Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

For the reasons stated below, the Court grants both Defendant's motion to dismiss Counts II and III of Plaintiff's Third Amended Complaint [67] and Plaintiff's motion for leave to file a sur-reply [78]. The case is set for further status on January 10, 2019 at 9:00 a.m.

I. Background1

The full background of this case is set forth in the Court's previous opinions, knowledge of which is assumed here. See [29]; [62]. In brief, as subrogee of Cessna Aircraft Company, Plaintiff Starr Indemnity & Liability Company ("Plaintiff") brings claims against Defendant YRC Inc. ("Defendant") for damage to two jet engines ("the cargo") that Cessna had tendered to Defendant for transportation from Orlando, Florida to Bridgeport, West Virginia in August 2014. [66, ¶¶ 6-9, 17.] As a result of this damage, Plaintiff states that it paid its insured, Cessna, the sum of $1,916,431.26. [Id. ¶ 37.]

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In Count I of Plaintiff's First Amended Complaint,2 Plaintiff sought to recover for damage to the cargo, as well as pre- and post-judgment interest, under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706. [18, at Count I ¶¶ 6-12.] In Counts II through IV, Plaintiff alleged that Defendant violated the Interstate Commerce Commission Termination Act of 1995 ("ICCTA"), 49 U.S.C. § 14704(a)(2) and 14704(e). [18, at Counts II-IV.] Plaintiff alleged that Defendant violated the ICCTA by failing to comply with several Federal Motor Carrier Safety Regulations ("FMCSRs") to which Defendant is subject, including (1) the safe loading requirements of 49 C.F.R. § 398.4(g)(1); (2) the requirements to observe driver regulations and conform with speed limits of 49 C.F.R. §§ 390.11 and 392.6; and (3) the annual inquiry and review of driving record, maintenance of driver qualification files, and duty to conform to the speed limit requirements of 49 C.F.R. §§ 391.25, 391.51, and 392.6. [Id.]

Defendant moved to dismiss Counts II-IV of the First Amended Complaint in July 2016. [See 22.] In support of its motion, Defendant argued that Plaintiff's sole and exclusive remedy for damage to cargo transported in interstate commerce (such as the cargo at issue here) is the Carmack Amendment, "to the exclusion of all other sources of law." [23, at 4-5.] Thus, according to Defendant, Counts II-IV of Plaintiff's complaint were subject to dismissal because they stemmed from the same loss of, or damage to, goods shipped in interstate commerce underlying Plaintiff's Carmack Amendment claim in Count I. See [22], [23].

On January 17, 2017, the Court denied Defendant's motion to dismiss. [See 29.] After considering the background of both the Carmack Amendment and the ICCTA, the Court concluded that Defendant had not provided any support for its argument that the Carmack Amendment preempted another federal statute, namely § 14704(a)(2). [Id. at 10.] Although the Court noted

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that the Carmack Amendment's preemptive scope is broad and that it does preempt state and common law remedies, the Court concluded that this preemptive scope is not "all inclusive" and that Defendant had not cited to any case law supporting its argument that the Carmack Amendment preempted another federal statute. [Id. at 9-10.] Therefore, although the Court expressed no opinion on the merits of Plaintiff's claims under the ICCTA, the Court declined to dismiss Counts II-IV on preemption grounds. The Court also declined to address the issue of whether § 14704 provided a private right of action for violations of the federal regulations that Plaintiff alleged, because Defendant had not raised this challenge in its motion. [Id. at 10.]

Defendant moved the Court to reconsider its decision in May 2017. [See 36.] Plaintiff opposed Defendant's motion [43], and Defendant filed a reply [48]. Plaintiff also moved for leave to file a third amended complaint and to file a sur-reply to Defendant's reply in support of its motion for reconsideration [49], which Defendant opposed [53]. In its reply brief, Defendant raised, for the first time, the argument that the plain language of § 14704(a) precluded the claims contained within Counts II-IV. See [48, at 2-3, 8-9]; [62, at 10]. Because Defendant had not fully developed this plain language argument until its reply brief, the Court concluded that the best course of action would be to allow Plaintiff to file an amended complaint and allow the issue to be fully litigated. [Id. at 10-11.] Consequently, the Court granted Plaintiff leave to file a third amended complaint, denied Plaintiff leave to file a sur-reply, and denied Defendant's motion to reconsider without prejudice to raising any arguments related to the plain language of § 14704 in opposition to the Third Amended Complaint. [62, at 11.]

In its Third Amended Complaint, Plaintiff now brings three counts against Defendant. Count I contains the same Carmack Amendment claim as the First Amended Complaint. [66, ¶¶ 5-12.] Likewise, Counts II and III once again seek to state claims under the ICCTA, 49 U.S.C.

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§§ 14704(a)(2) and 14704(e), now for non-compliance with 49 C.F.R. §§ 392.2, 392.6, 392.9(a-b), and 393.100-93.136 (collectively "the Relevant FMCSRs"). [Id. at 4-16.] Defendant has moved to dismiss Counts II and III of the Third Amended Complaint. [See 67.] Plaintiff has responded [72] and Defendant has replied [77]. Plaintiff also has requested leave to file a sur-reply. [78.]

II. Legal Standard

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in original). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level." E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). "A pleading that offers 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). Dismissal for failure to state a claim under Rule 12(b)(6) is proper "when the allegations in a complaint, however true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiff's well-pleaded factual allegations and draws all reasonable inferences in Plaintiff's favor. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007). Evaluating whether a "claim is sufficiently plausible to survive a motion to dismiss is 'a context-specific task

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that requires the reviewing court to draw on its judicial experience and common sense.'" Id. (quoting McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011)).

III. Analysis

The parties dispute whether certain subsections of the ICCTA, specifically 49 U.S.C. §§ 14704(a)(2) and 14704(e), provide a private right of action for violations of the Relevant FMCSRs. The key question is the authority under which the Relevant FMCSRs were promulgated.3 Defendant asserts that the Relevant FMCSRs were promulgated under the authority of Chapters 311-317 in Part B of Subtitle VI of Title 49, i.e. 49 U.S.C. §§ 31100-31708 ("Part B of Subtitle VI"). [68, at 1-2.] Plaintiff counters that the Relevant FMCSRs were promulgated, at least in part, under 49 U.S.C. § 13902, which falls within Part B of Subtitle IV of Title 49, i.e. 49 U.S.C. §§ 13101-14901 ("Part B of Subtitle IV").4 [72, at 2.] If Plaintiff is correct, then § 14704 provides a private right of action against Defendant for its alleged noncompliance with the Relevant FMCSRs. However, for the reasons explained below, the Court concludes that the Relevant FMCSRs were not promulgated under Part B of Subtitle IV. Consequently, § 14704 does not provide a private right of action for violations of the Relevant FMCSRs and Counts II and III do not state a claim.

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A. 49 U.S.C. § 14704

Section 14704(a)(2) provides that "[a] carrier or broker providing transportation or service subject to jurisdiction under chapter 135 is liable for damages sustained by a person as a result of an act or omission of that carrier or broker in violation of this part." 49 U.S.C. § 14704(a)(2).5 The Seventh Circuit and other courts of appeals have held that § 14704(a)(2) allows individuals to "bring civil actions against carriers or agents for violations of legal rights established under the [Motor Carrier Act] or regulations." Mervyn v. Atlas Van Lines, Inc., 882 F.3d 680, 681-82 (7th Cir. 2018) (citing 49 U.S.C. § 14704(a)(2)); see also Fulfillment Servs. Inc. v. United Parcel Serv., Inc., 528 F.3d 614, 621 (9th Cir. 2008) ("[T]he plain language of § 14704(a)(2) counsels that there is a private right of action for violations within that part of the Termination Act."); Owner-Operator Indep. Drivers Ass'n, Inc. v. New Prime, Inc., 192 F.3d 778, 785 (8th Cir. 1999) ("[§ 14704(a)(2)] authorizes private actions for damages and injunctive relief to remedy at least some violations of the Motor Carrier Act and its implementing regulations").

However, § 14704(a)(2) specifically provides that a carrier is liable for damages caused by a violation of "this part." 49 U.S.C. § 14704(a)(2). As the Court explained in its previous opinion, the plain language of that...

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