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ABT Electronics, Inc. v. Airgroup Corp.

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

February 15, 2018



          Robert M. Dow, Jr., Judge

         In its First Amended Complaint, Plaintiff ABT Electronics, Inc. (“Plaintiff) brings claims against Defendant Airgroup Corporation a/k/a Radiant Global Logistics, Inc. (“Defendant”) for liability under the Carmack Amendment, 49 U.S.C. § 14706 (Count I), fraud (Count II), and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. (Count III). Currently before the Court is Defendant's motion [15] to dismiss Counts II and III of the First Amended Complaint as preempted by the Carmack Amendment. For the reasons explained below, Defendant's motion [15] is granted. Counts II and III in the First Amended Complaint are dismissed. This case will be set for further status hearing after the parties file a revised status report on March 15, 2018.

         I. Background [1]

         Plaintiff is an appliance and electronics retailer headquartered in Illinois. [12, ¶ 1.] Defendant is a logistics and freight forwarding company organized in the state of Washington. [Id., ¶ 2.] During the time period relevant to the complaint, Defendant performed freight forwarding services for Plaintiff by arranging for the transportation of Plaintiff's consumer goods, including televisions and other electronics (“the goods”), to customers throughout the United States. [Id. ¶ 3.] Defendant would take possession of the goods at Plaintiff's warehouse in Glenview, Illinois and then transport them to their intended destination. [Id., ¶¶ 3, 6.] The parties operated under the terms of a Tariff Rate Agreement that Defendant issued to Plaintiff in April 2015, under which Defendant committed to deliver the goods to customers within six business days of taking possession of the goods from Plaintiff. [Id., ¶¶ 7-8.]

         Plaintiff alleges that, from October 31, 2016 to December 8, 2016, during Plaintiff's busy holiday season, Defendant failed to deliver the goods to Plaintiff's customers within six business days. According to Plaintiff, delivery times on 2, 185 out of 2, 750 of these shipments exceeded ten days and sometimes took up to seventy days. [Id., ¶¶ 9-10.] When Plaintiff contacted Defendant about the status of these delayed deliveries, Defendant misrepresented their status and did not provide valid tracking numbers for them to Plaintiff and its customers. [Id., ¶ 12.] Plaintiff claims damages for the loss in value to the goods during this unreasonably long transportation period. [Id., ¶ 11.] Plaintiff further alleges that Defendant's delay in delivering the goods resulted in customer complaints, negative reviews from customers, and the need for Plaintiff to issue credits, discounts, and gift cards, and re-shipments to customers in order to mitigate its damages from this delay. [Id.]

         Plaintiff further alleges that, in September 2016, the parties agreed to an “Enhanced Service” delivery service that Defendant would make available when delivering Plaintiff's goods (specifically, televisions) to Plaintiff's customers. This Enhanced Service consisted of using a two-man crew to perform white glove delivery and set up of the televisions at a customer's home. [Id., ¶ 32.] The parties agreed that the fee for this Enhanced Service delivery would be $150 for televisions less than 150 pounds and $1 per pound for televisions more than 150 pounds. This pricing was confirmed in a Tariff sheet that Defendant issued to Plaintiff in September 2016. [Id., ¶¶ 33-35.] This fee was to be all-inclusive with no further delivery charges. [Id., ¶ 33.] According to Plaintiff, in February 2017, Defendant invoiced Plaintiff $177, 451.51 for Enhanced Service delivery on all orders shipped from November 25, 2016 to December 7, 2016. [Id., ¶¶ 41-42.] This charge was not authorized for all of these shipments; this charge also was not all-inclusive as the parties had agreed it would be. [Id., ¶¶ 42-43.] Moreover, after Plaintiff surveyed a sample of its customers from these invoiced deliveries regarding their delivery experience, Plaintiff determined that most of these customers had not actually received the Enhanced Service delivery for which Plaintiff had been invoiced by Defendant. [Id., ¶¶ 45-46.] Plaintiff alleges that Defendant knew that this invoicing was improper and knew or should have known that the Enhanced Service delivery was not being performed in connection with these deliveries. [Id., ¶ 47.]

         Plaintiff sued Defendant in Illinois state court in March 2017, and Defendant thereafter removed the action to this Court. [See 1.] On May 25, 2017, Plaintiff filed its First Amended Complaint. [See 12.] In its First Amended Complaint, Plaintiff brings a claim for damages under the Carmack Amendment, 49 U.S.C. § 14706, for Defendant's unreasonably delay in delivering Plaintiff's goods to its customers (Count I). Plaintiff also brings claims for fraud and for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) for fraudulently invoicing Plaintiff for Enhanced Service delivery that was not authorized and largely not performed (Counts II and III). On June 14, 2017, Defendant filed a motion to dismiss Counts II and III of the First Amended Complaint pursuant to Rule 12(b)(6), which is currently before the Court.

         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).

         III. Analysis

         Defendant argues that Counts II and III of the First Amended Complaint must be dismissed because these state law claims alleging delay and damage to the goods are preempted by the Carmack Amendment. Plaintiff responds that Counts II and III focus on allegations of fraudulent billing practices subsequent to Defendant's allegedly negligent delay and handling of the goods. According to Plaintiff, this constitutes a separate and independent harm and thus is not preempted by the Carmack Amendment.

         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.[2] 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.[3] REI Transp., Inc. v. C.H. Robinson Worldwide, Inc. 519 F.3d 693, 697 (7th Cir. 2008) (citing 49 U.S.C. § 14706(a)(1)). Recoverable damages include “damages for delay, lost profits (unless they are speculative), and all reasonably foreseeable consequential damages.” Am. Natl Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 931 (7th Cir. 2003) (citations omitted).

         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 Transp., 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 another.” Id. To solve this problem, the Carmack Amendment “create[d] a national uniform rule of carrier liability concerning interstate shipments.” Pinkerton, 89 F.3d at 455; see also Moffit v. Bekins Van Lines Co., 6 F.3d 305, 307 (5th Cir. 1993) (noting that the purpose of the Carmack Amendment “was to create uniformity out of disparity”). Congress ensured this national uniformity by both placing substantive limits on the rights of carriers to contract away liability and by preempting state causes of action against carriers for damaged or lost goods. REI Transp., 519 F.3d at 697 (citing Adams Express, 226 U.S. at 505). The Carmack Amendment's preemptive scope is broad; the Supreme Court has stated that “[a]lmost every detail of the subject is covered so completely that there can be no rational doubt that Congress intended to take possession of the subject and supersede all state regulation with reference to it.” Adams Express, 226 U.S. at 505-06.

         Although this preemptive scope is broad, “it is not all-inclusive.” Schwarz v. Nat'l Van Lines, Inc., 2004 WL 1166632, at *4 (N.D. Ill. May 21, 2004). The Carmack Amendment preempts state law and common law claims “if they in any way enlarge the responsibility of the carrier for losses or if they at all affect the ground of recovery or the measure of recovery.” Glass v. Crimmins Transfer Co., 299 F.Supp.2d 878, 885 (C.D. Ill. 2004). But the Carmack Amendment does not preempt state law claims that allege liability “on a ground ...

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