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Starr Indemnity & Liability Co. v. YRC, Inc.

United States District Court, N.D. Illinois, Eastern Division

January 17, 2017

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

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr. United States District Judge

         Plaintiff Starr Indemnity & Liability Company, as subrogee of Cessna Aircraft Company, brought suit against Defendant YRC, Inc. for cargo damage. Plaintiff alleges that as a result of Defendant's damage to the cargo, Plaintiff was compelled to pay its insured, Cessna Aircraft Company, the sum of $1, 916, 413.26. Before the Court are Defendant YRC Inc.'s motion [22] to dismiss Counts II, III, and IV pursuant to Federal Rule of Civil Procedure 12(b)(6), and Plaintiff's motion [27] to permit and schedule oral argument on Defendant's motion to dismiss. For the reasons set forth below, the Court denies Defendant's motion to dismiss [22] and denies Plaintiff's motion for oral argument [27]. This case is set for further status hearing on February 2, 2017 at 9:00 a.m.

         I. Background

         Plaintiff Starr Indemnity is the insurance provider for Cessna Aircraft Company, a company that manufactures, sells, and leases business jets. [15 (Complaint) at ¶¶ 1-2.] Defendant YRC is an interstate motor carrier. [Id. at ¶ 4.] Plaintiff alleges that on or about August 13, 2014, Cessna tendered two jet engines (“the cargo”) to Defendant for transportation from Orlando, Florida to Bridgeport, West Virginia. [Id. at Count I ¶ 6.] Defendant issued a bill of lading to Cessna acknowledging receipt of the cargo for transport. [Id.] Plaintiff contends that on or about August 14, 2014, the cargo was extensively damaged during transportation by Defendant. [Id. at Count I ¶ 7.] Plaintiff further contends that as a result of the damage to the cargo, Plaintiff was compelled to pay its insured, Cessna, the sum of $1, 916, 413.26. [Id. at Count I ¶ 9.]

         Plaintiff contends that Defendant operates pursuant to authority issued to it by the Federal Motor Carrier Safety Administration (“FMCSA”) and provides transportation service subject to jurisdiction under Subchapter I of Chapter 135 of the Interstate Commerce Commission Termination Act (“ICCTA”) pursuant to 49 U.S.C. §§ 13501 et seq. and is subject to the requirements of the Federal Motor Carrier Safety Regulations (“FMCSR”). [Id. at Count II ¶ 3.] Plaintiff's amended complaint alleges liability under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706, (Count I), as well as violations of the ICCTA, 49 U.S.C. § 14704(a)(2) and 14704(e), (Counts II, III, and IV).

         In Count I, Plaintiff alleges that under the Carmack Amendment, Defendant is liable for $1, 916, 413.26 in cargo damage plus pre-judgment and post-judgment interest. Plaintiff asserts that there is in excess of $10, 000 at issue per the bill of lading, exclusive of interest and costs. [Id. at ¶ 5.]

         In Count II, Plaintiff alleges that Defendant permitted the trailer transporting the cargo “to be driven when it was so loaded, or so improperly distributed or so inadequately secured as to prevent its safe operation, ” in violation of the safe loading requirements of 49 C.F.R. § 398.4(g)(1).[1] [See id. at Count II ¶ 20.] According to Plaintiff, the trailer contained Cessna's cargo and other commodities being shipped by unrelated entities. [Id. at Count II ¶ 9.] Plaintiff contends that Defendant was responsible for blocking and bracing the various commodities inside the trailer and for installing sealed dividers between Cessna's cargo and the other commodities, which Plaintiff alleges was intended to help prevent shifting of cargo. [Id. at Count II ¶¶ 10-12.] Plaintiff alleges that on or about August 14, 2014, the cargo was damaged as a result of a crash involving a roll-over of the trailer in Ohio. [Id. at Count II ¶ 14.] Plaintiff contends that the driver, an employee of Defendant, gave a witness statement to the Ohio Police stating that he was “[d]riving from 77 N to 21 South doing 30 m.p.h. Load shifted & set rolled over (Double Trailers).” [Id. at Count II ¶¶ 15, 17.] According to Plaintiff, when the police asked the driver what caused him to go off the road, the driver stated that “[t]he load shifted.” [Id. at Count II ¶ 18.] Plaintiff contends that assuming, arguendo, that the driver responded truthfully in his witness statement, Defendant violated the safe loading requirements of 49 C.F.R. § 398.4(g)(1), and thus violated Subchapter I, Chapter 135 of ICCTA. Plaintiff asserts that Defendant is therefore liable for $1, 916, 413.26 in cargo damage plus pre-judgment and post-judgment interest and attorney's fees, pursuant to 49 U.S.C. § 14704(a)(2) and (e).[2] [See id. at Count II ¶¶ 20-21.]

         In Count III, Plaintiff alleges, upon information and belief, that the driver made false statements to the police in his witness statement. [Id. at Count III ¶ 19.] Plaintiff contends that the driver falsely stated that he was traveling at 30 m.p.h. when he was actually “traveling in excess of two times the posted speed limit of 30 m.p.h.” [Id. at Count III ¶ 20.] Plaintiff further contends that the vehicle left the road not because the load shifted, but “solely as a result of [the driver's] flagrant violation of the posted speed limit.” [Id. at Count III ¶ 21.] Plaintiff asserts that under 49 C.F.R. § 390.11[3] of the FMCSR, motor carriers such as Defendant are directed to require that their drivers observe and comply with the duties set forth in the FMCSR, specifically with 49 C.F.R. § 392.6, [4] which prohibits motor carriers from permitting operation of any commercial motor vehicle in excess of the speed limit. [Id. at Count III ¶ 21.] Plaintiff alleges that by failing to require the driver to adhere to the requirements of the FMSCR, including 49 C.F.R. §§ 390.11 and 392.6, Defendant violated Subchapter I, Chapter 135 of ICCTA and is therefore liable for $1, 916, 413.26 in cargo damage plus pre-judgment and post-judgment interest and attorney's fees, pursuant to 49 U.S.C. § 14704(a)(2) and (e). [See id. at Count III ¶¶ 28, 32.]

         Finally, in Count IV, Plaintiff alleges that the driver has a record of criminal convictions in Ohio for speeding and other moving violations. [Id. at Count IV ¶ 26.] Plaintiff contends that Defendant knew or should have known about the driver's prior convictions for speeding and driving while under the influence of alcohol or drugs and that Defendant failed to give sufficient, if any, weight to these violations. [Id. at Count IV ¶ 26.] Plaintiff further alleges that Defendant's failure to properly observe the driver's past driving records and to prevent him from operating as a commercial driver constitutes a violation of the ICCTA and the FMCSR, citing 49 C.F.R. §§ 391.25, [5] 391.51, [6] and 392.6. Plaintiff contends that Defendant is liable for $1, 916, 413.26 in cargo damage plus pre-judgment and post-judgment interest and attorney's fees, pursuant to 49 U.S.C. § 14704(a)(2) and (e). [See id. at Count IV ¶¶ 27-28, 32.]

         Defendant has moved to dismiss Counts II, III, and IV pursuant to Federal Rule of Civil Procedure 12(b)(6).

         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). However, “[s]pecific facts are not necessary; the statement need only give the defendant fair notice of what the * * * claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly, 550 U.S. at 555) (alteration in original). 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).

         III. Analysis

         Defendant argues that the Court should dismiss Counts II, II, and IV, which are based on violations of the ICCTA, §§ 14704(a)(2) and (e), because the Carmack Amendment provides the sole and exclusive remedy for damage to cargo transported in interstate commerce. As an initial matter, the Court will discuss the background of the Carmack Amendment and the ICCTA to set the stage for the analysis of this motion to dismiss.

         The Interstate Commerce Act contains several provisions governing a motor carrier's liability to a shipper for the loss of, or damage to, an interstate shipment of goods. N. Am. Van Lines, Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452, 453 (7th Cir. 1996). These provisions are commonly referred to collectively as the Carmack Amendment. The Carmack Amendment provides shippers with the statutory right to recover for actual losses or injuries to their property caused by carriers involved in the shipment.[7] Gordon v. United Van Lines, Inc., 130 F.3d 282, 285-86 (7th Cir. 1997). The Carmack Amendment limits the carrier's liability to the “actual loss or injury to the property” damaged en route.[8] REI Transport, Inc. v. C.H. Robinson Worldwide, Inc. 519 F.3d 693, 697 (7th Cir. 2008) (citing 49 U.S.C. § 14706(a)(1)).

         Prior to the enactment of the Carmack Amendment, disparate schemes of carrier liability existed among the states, some of which allowed carriers to limit or disclaim liability, whereas others permitted full recovery. REI Transport, 519 F.3d at 697. Thus, a carrier could have been “held liable in one court when under the same state of facts he would be exempt from liability in another.” Adams Express Co. v. Croninger, 226 U.S. 491, 505 (1913). This patchwork of regulation made it “practically impossible for a shipper engaged in a business that extended beyond the confines of his own state * * * to know * * * what would be the carrier's actual responsibility as to goods delivered to it for transportation from one state to ...


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