PREEMPTION (RAILROADS & LOCOMOTIVES) / Court Case – In motion to dismiss under Rule 12(b)(6), held: Locomotive Inspection Act held to preempt state contract claims based on allegations by Plaintiff Canadian Pacific Railway / user of locomotive against manufacturers of seats used in locomotive made by GE Transportation that the seats failed to meet contracted safety requirements. The Act, “manifests Congress’s intent ‘to occupy the entire field of regulating locomotive equipment’ and, as such, pre-empts any state laws or regulations which pertain ‘to the design, the construction and the material of every part of the locomotive and tender and of all appurtenances.’”

Del. & Hudson Ry. Co. v. Knoedler Mfrs., Inc., C.A. No. 11-314 Erie (U.S. District Court for the Western District of Pennsylvania, August 1, 2013). Court-issued opinion available here.

FEDERAL PREEMPTION (FEDERAL AVIATION ADMINISTRATION AUTHORIZATION ACT OF 1994) / Breach of contract action on agreement by which plaintiff commercial finance company purchased “all right, title and interest” of defendant logistics provider (implied but not explicitly stated by the court to be a motor carrier) in such logistics provider’s accounts receivable, and defendant logistics provider argued that breach of contract claim was preempted by federal law because the Federal Aviation Administration Authorization Act of 1994 “preempts the enactment or enforcement of state laws in a manner related to the prices, routes, and services of a motor carrier” – held: Such sale of receivables did not constitute a contract that “related to” a “rate, route, or service” of the logistics provider. No federal preemption of breach of contract on sale of receivables.

Porter Capital Corp. v. Johns Manville, Inc., Case No. 2:12-CV-00925-RDP (U.S. District Court for the Northern District of Alabama, June 14, 2013).

Google Scholar version of court’s opinion available here.


Motor Carriers & Preemption (City Regulation of Drayage) / Unanimous U.S. Supreme Court rules on Port and City of Los Angeles requirements that drayage trucking companies serving Port of Los Angeles must (1) affix a placard to each truck posting a telephone number to call relating to environmental or other concerns an observer might have about such truck, and (2) submit to the Port an off-street parking plan for each truck – held: Expressly preempted and therefore invalid under Federal Aviation Administration Authorization Act of 1994 as a state “law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … with respect to the transportation of property.” THIS IS A VERY BIG DEAL AND HAS BEEN LONG-AWAITED.

American Trucking Association v. Los Angeles. Copy of court-issued opinion available here.

This is a major development both specifically as to the Ports of Los Angele and Long Beach, and with respect to other ports entertaining similar proposed ordinances, regulations or laws.

The trade-off in policy values: Federal preemption to ensure uniformity of standards across the United States through 49 U.S. Code § 14501(c)(1) versus locality’s interest in protecting its environment. 

See Washington Post story here, and SCOTUS Blog story here.

RAILROADS (FEDERAL PREEMPTION) – A 1975 order of a state safety agency that requires a railroad to hire two brakemen around the clock to prevent the railroad’s cars running onto adjacent tracks and colliding with other rail cars held to be federally preempted by the Federal Railroad Safety Act of 1970. A textbook tutorial in federal preemption analysis under this statute and related Federal Railroad Administration regulations.

United Transportation Union v. Pennsylvania Public Utility Commission, No. 1270 C.D. 2012 (Commonwealth Court of Pennsylvania, May 20, 2013). Court-issued opinion available here.

REMARKS / U.S. Supreme Court unanimously rules that the Federal Aviation Authorization Act of 1994 (“FAAA”) DOES NOT federally preempt state consumer fraud statute and negligence claims against towing company that moved plaintiff’s car during a snowstorm without his permission. Comment: This sort of “Captain Obvious” answer by a unanimous court is just common sense. But federal preemption doctrine in the transportation field continues to be a major source of confusion and inefficiency. From negligence standards at rail crossings, to airline agreements with passengers, to all manner of motor carrier operations – it’s just too easy to “throw in a preemption argument” and gum up the works in court for months or worse.

During briefing and prior to argument before the U.S. Supreme Court this was anticipated in an “UPCOMING” post three month ago available here.

Official copy of opinion available here.

Legal Take-Away:

There are common sense limits to the extent of federal preemption doctrine’s application to transportation. Some matters are indeed so local that they will not be deemed to implicate national concerns.

Like local towing companies.

Practical Take-Away:

Common sense is not codified.

Look what it took to get a ruling on this obvious point (i.e., did Congress intend the Federal Aviation Authorization Act to govern car tows in small New England cities?). They had to go all the way to the U.S. Supreme Court.

The vagueness of federal preemption law continues to confuse transport providers and muddy the waters for those lawyers and courts who are supposed to serve them. 

MOTOR CARRIER (PREEMPTION) / FMCSA Grants Order Determining that Alabama Metal Coil Securement Act is Federally Preempted.

March 5, 2013., Order; Grant Of Petition For Determination Of Preemption.

“FMCSA grants a petition submitted by the American Trucking Associations (ATA) requesting a determination that the State of Alabama’s Metal Coil Securement Act (the Act) is preempted by Federal law. Federal law provides for preemption of State commercial motor vehicle (CMV) safety laws that are more stringent than Federal regulations and (1) Have no safety benefit; (2) are incompatible with Federal regulations; or (3) would cause an unreasonable burden on interstate commerce. FMCSA has determined that there is insufficient support for the claimed safety benefits and that the Act places an unreasonable burden on interstate commerce.

“On June 26, 2009, FMCSA sent a letter to then-Governor Bob Riley of Alabama stating that the Act appeared to be incompatible with the requirements of FMCSA’s Motor Carrier Safety Assistance Program. FMCSA also drew attention to two Federal laws authorizing preemption of State legislation (49 U.S.C. 14506 and 31141) and indicated that they might be applicable. The Agency urged State officials to work together with FMCSA officials to resolve any conflict between State and Federal law. Governor Riley responded on August 26, 2009, explaining that the Act was adopted in response to a number of accidents in Alabama involving the transport of metal coils. Governor Riley took the position that Alabama’s metal coil load securement certification requirements were not preempted by Federal law.

“On December 22, 2010, ATA petitioned FMCSA for a determination that Alabama’s metal coil load securement certification requirements and penalties create an unreasonable burden on interstate commerce and are preempted under 49 U.S.C. 31141. ATA contended that Alabama’s requirement that drivers obtain certification in metal coil load securement is more stringent than and incompatible with Federal metal coil safety regulations.

In its December 22, 2010 letter, ATA also requested a determination that the requirement that the driver carry the certification and display it upon demand is preempted by 49 U.S.C. 14506. The recent amendment to the Act, however, removed this requirement, rendering this aspect of ATA’s request moot.

“By letter dated January 25, 2011, the ADPS responded to ATA’s petition. ADPS acknowledged that the requirements of the Act are more stringent than Federal regulations, but stated that the requirements should not be preempted because they have safety benefits and do not place an unreasonable burden on interstate commerce.”

MOTOR CARRIER (FEDERAL PREEMPTION & “EMPLOYER” DEFINITION) / The Federal Motor Carrier Safety Act – including its definition of “employer” – did not preempt state workers compensation law because “the purposes of the two statutes are clearly distinct”.

Truck driver injured on the job when consignee’s employee drove a forklift over driver’s foot while driver stood on loading dock. First, brought successful claim under Kentucky workers compensation law against his motor carrier-employer, then brought the subject tort suit against consignee and consignee’s parent (diversity jurisdiction). In holding Kentucky workers compensation law provided exclusive relief that precluded the subject tort suit the court ruled: Congress had not, “intended] the [Federal Motor Carrier Safety Act] to define ‘employer’ for the purposes of workers’ compensation laws” – therefore it did not preempt Kentucky workers compensation law.

Black v. Dixie Consumer Products, LLC, Slip copy, 2013 WL 645954 (U.S. Court of Appeals for the 6th Circuit, February 22, 2013). Free copy available here.

“B. Preemption by the Motor Carrier Safety Act

“Black also asserts that the provisions defining “employer” within the Federal Motor Carrier Safety Act (FMCSA) preempt the classification of Georgia-Pacific and Dixie as statutory employers under the KWCA.

“The FMCSA states that the primary purpose of the legislation is:

(1) to promote the safe operation of commercial motor vehicles; (2) to minimize dangers to the health of operators of commercial motor vehicles and other employees whose employment directly affects motor carrier safety; and (3) to ensure increased compliance with traffic laws and with the commercial motor vehicle safety and health regulations and standards prescribed and orders issued under this chapter. 49 U.S.C. § 31131(a). The statute provides, inter alia, that an “employer” is “a person engaged in a business affecting interstate commerce that owns or leases a commercial motor vehicle in connection with that business, or assigns an employee to operate it,” 49 U.S.C. § 31132(3)(A), and continues to enumerate various duties of employers with respect to the safety of motor vehicles and their operators.

“When considering federal preemption of state law, this court must begin “with the traditional presumption . . . that Congress did not intend to displace state law . . . unless that was the clear and manifest purpose of Congress.” Interstate Towing Ass’n, Inc. v. City of Cincinnati, 6 F.3d 1154, 1161 (6th Cir. 1993) (citations and internal quotations omitted). “In no field has [this] deference to state regulation been greater than that of highway safety regulation.” Id. at 1162. Further, preemption of state authority occurs only in limited cases: (1) where Congress preempts state law in express terms; (2) when Congress creates a regulatory scheme “so pervasive as to make reasonable the inference that Congress left no room to supplement it”; or (3) where “state law is preempted to the extent that it actually conflicts with federal law.” Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 203-04 (1983).

“Here, the FMCSA did not expressly preempt the Kentucky workers’ compensation statute, and Black [Plaintiff] does not allege any actual conflict between the federal and state laws. Rather, Black claims that the FMCSA is a “comprehensive scheme for the regulation of commercial motor vehicle safety,” which was intended to “fully occupy the parameters of motor carrier employment.”

“However, Black’s argument is without merit. First, there is no indication that Congress intended the FMCSA to preempt state workers’ compensation statutes where the purposes of the two statutes are clearly distinct. The primary purpose of the KWCA is to ensure that workers’ compensation benefits are available to injured employees and thus requires contractors to assume responsibility for the provision of workers’ compensation benefits where the subcontractor has otherwise failed to do so. In contrast, the FMCSA was enacted specifically to promote the safety of commercial motor vehicles and their operators and accordingly sets forth detailed safety and health standards for those operators. There is simply no indication that the FMCSA, a statute intended to promote commercial motor vehicle safety, should preempt state legislation regarding the provision of workers’ compensation benefits.

“Black further argues that Georgia-Pacific and Dixie should be required to comply with the FMCSA before they may be considered “employers” under the KWCA. However, there is no indication that a classification of Georgia-Pacific or Dixie as an “employer” under the FMCSA should have any bearing on its classification, if any, under the KWCA, or that Congress intended the FMCSA to define “employer” for the purposes of workers’ compensation laws. The fact that Dixie and Georgia-Pacific can be classified as employers for the purpose of one statute, but not the other, is of no consequence.”

TORTS (FRAUD) / Package delivery service (Falcon) purchases rights to deliver on behalf of air express company (DHL) and assumes duties to air express company to make deliveries; air express company then ceases domestic U.S. air express activity; package delivery service lawsuit against air express company – held: Fraud claim and related punitive damages preempted (1) Airline Deregulation Act of 1978 and (2) FAA Authorization Act.

DHL Exp. (USA) Inc. v. Falcon Exp. Intern. Inc., 2013 WL 561457 (Texas Court of Appeals – Houston, February 14, 2013). Free copy available here.

“Falcon alleged and presented evidence to the jury that DHL defrauded it of $1,571,426.31 to enter a contract to become a reseller of DHL’s small package delivery services in the United States with written assurances that DHL had ruled out any possibility of withdrawing from the United States market and was “here to stay.” Specifically, Falcon asserted that DHL failed to disclose material facts with the intent to induce Falcon to pay DHL to assume a reseller agreement that Freight Savers Express (“FSE”) had with DHL. After DHL, only four months later, announced that it would discontinue all domestic shipping operations, effectively destroying Falcon’s business, Falcon sued DHL to rescind the agreement, get its money back, and punish DHL for its wrongdoing. The jury unanimously found that DHL defrauded Falcon and awarded it $1,704,228.79 in actual damages and $3,214,724.62 in exemplary damages.

“Here, Falcon alleged and presented evidence that DHL committed fraud by nondisclosure in making false and misleading representations about whether DHL “still considered a withdrawal from the United States domestic market an option,” which DHL had a duty to disclose because it “created a false impression by making partial disclosures”; “knew that Falcon was ignorant of the undisclosed fact”; and “voluntarily disclosed some information to Falcon.” Falcon asserts that DHL made “false and misleading disclosures intending to influence those doing business with DHL” and “fraudulently induced Falcon to enter into a contractual relationship as a reseller and pay off” FSE’s “debt to DHL.”

“In short, Falcon complains that DHL had a duty to disclose the fact that it was not going to continue small package delivery services in the United States and failed to disclose this fact with the intent to get Falcon to assume FSE’s reseller relationship by paying FSE’s debt to DHL. Simply put, Falcon complains that DHL engaged in wrongdoing in this business transaction. This is clearly not the type of conduct or activity that Congress meant to regulate in crafting the ADA or the FAAAA. The fact that the subject matter of the underlying contract concerned DHL’s delivery services is only remotely connected to Falcon’s claim. See Egelhoff v. Egelhoff 532 U.S. 141, 146, 121 S.Ct. 1322, 1327 (2001) (noting, in ERISA context, that “the term ‘relate to’ cannot be taken ‘to extend to the furthest stretch of its indeterminacy,’ or else ‘for all practical purposes pre-emption would never run its course’ ”) (quoting N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 1677 (1995)). If Falcon’s fraud claim is “related to” DHL’s rates, routes, and services and is preempted, as asserted by the majority, then virtually any claim regarding a business contract with an air or motor carrier will be preempted. Congress simply did not intend to so immunize air and motor carriers. And the fallacy of the majority’s reasoning is made apparent in the result dictated by its holding: it destroys Falcon’s remedy of contract rescission and remands the case to the trial court for proceedings to enforce a contract that a jury has found is based upon fraud.”

UPCOMING – Does the Federal Aviation Authorization Act of 1994 (“FAAA”) federally preempt state consumer fraud statute and negligence claims against towing company that moved plaintiff’s car during a snowstorm without his permission?

Before the U.S. Supreme Court

Dan’s City Used Cars, Inc. v. Pelkey 


On Writ of Certiorari from the Supreme Court of New Hampshire

Petitioner’s Brief on the Merits available here (subscription required).

Practical business take-away:

One lesson is to avoid questions about federal preemption by the Federal Aviation Authorization Act of 1994 if at all possible. Here a simple case of an unwanted towing of a car in a New England town is the subject of a petition for certiorari to the U.S. Supreme Court.

The wise executive and his / her counsel will think twice before bringing a lawsuit under state or local law where such federal preemption might be raised as a defense.
These doctrinal fun-and-games are one of the grave deficiencies of the U.S. legal framework governing transport business law. Neither the uncertainty they create nor the legal fees required to mitigate that uncertainty make a positive contribution to our economy.
The law should be practical and this aspect of federal preemption doctrine is anything but.

Basic question:

Does this FAAA apply to federally preempt a lawsuit against a local towing company? The FAAA is currently the subject of litigation about the scope of federal preemption before the U.S. Supreme Court in the context of the Port of Los Angeles’ regulation of trucking and drayage activities inside the boundaries of that port.

Discussion in petitioner’s brief:

“In this case, a vehicle owner whose car was towed from his apartment house’s parking lot without his knowledge or consent to allow for snow removal, and disposed of several months later by the towing company after towing and storage charges were not paid, sued the towing company in state court for damages, alleging negligence and consumer fraud. The New Hampshire Supreme Court reversed a trial court ruling that the claims against the towing company were preempted by the FAAAA, and interpreted § 14501(c)(1) to permit the vehicle owner to pursue both a statutory consumer fraud claim and a negligence claim against the towing company. The questions presented are as follows:

“1. Are the Respondent’s state-law consumer-fraud and negligence claims preempted because they are “related to” the “service[s]” provided by the tow truck company?

“2. Are the Respondent’s state-law consumer-fraud and negligence claims preempted because they are made “with respect to the transportation of property”?

FEDERAL RAIL SAFETY ACT / Lawsuit on multiple state tort theories by motorcyclist against railroad for injuries in collision with train at rail / highway crossing – Held: Under Federal Rail Safety Act two pleaded tort claims not preempted and two other pleaded tort claims federally preempted.

Federal Rail Safety Act preempted state tort claims for (1 negligence per se, and (2) failure to warn based on alleged misclassification of tracks at crossing. Federal Rail Safety Act did not preempt state tort claims for failure to maintain safe crossing area.

Zimmerman v. Norfolk Southern Corp., 2013 WL 238789 (U.S. Court of Appeals for the 3rd Circuit, January 23, 2013). Free copy available here.