2019 WL 115204
CHECK OHIO SUPREME COURT RULES FOR REPORTING OF OPINIONS AND WEIGHT OF LEGAL AUTHORITY.
Court of Appeals of Ohio, Twelfth District, Clermont County.
TOTAL QUALITY LOGISTICS, LLC, Appellant,
v.
JK & R EXPRESS, LLC, Appellee.
NO. CA2018-05-034
|
1/7/2019
CIVIL APPEAL FROM CLERMONT COUNTY COURT OF COMMON PLEAS
Case No. 2016-CVH-01684
Attorneys and Law Firms
Bricker & Eckler LLP, Jeffrey P. McSherry, 201 East Fifth Street, Suite1110, Cincinnati, Ohio 45202, for appellant
Roetzel & Andress LPA, Chad M. Sizemore, 250 East Fifth Street, Suite 310, Cincinnati, Ohio 45202, for appellee

OPINION
RINGLAND, P.J.
*1 { ¶ 1} Plaintiff-appellant, Total Quality Logistics, LLC (“TQL”), appeals a decision of the Clermont County Court of Common Pleas, granting summary judgment in favor of defendant-appellee, JK & R Express, LLC (“JK & R”). For the reasons detailed below, we affirm the trial court’s decision.

{ ¶ 2} The relevant facts are largely undisputed. TQL is a freight broker. In this capacity, TQL arranges for transportation of their customers’ products from one location to another. As such, TQL’s customers pay TQL for arranging the transportation of their products with a carrier, and TQL then pays the carrier to transport the product. JK & R is a carrier that transports such products. In January 2016, TQL and JK & R entered into a broker-carrier agreement that provided terms for the transportation of TQL’s customers.

{ ¶ 3} Contel Fresh contacted TQL and requested transportation of a load of organic apples from Washington to locations in Missouri and New Jersey. TQL and JK & R reached an agreement for JK & R to transport the apples for $5,900. TQL faxed JK & R a confirmation sheet indicating the price and locations where the apples were to be picked up and delivered. On June 28, 2016 JK & R picked up the apples. However, while en route to Missouri, JK & R’s trailer caught fire, resulting in a complete loss of the apples.

{ ¶ 4} TQL reimbursed Contel Fresh $86,240 for the loss of the apples by offsetting open invoices that Contel Fresh owed TQL. Contel Fresh then assigned all claims and causes of action it had against JK & R to TQL for the loss of the apples.

{ ¶ 5} On December 7, 2016, TQL filed the instant action against JK & R seeking damages for breach of contract and breach of account, or, in the alternative, unjust enrichment and promissory estoppel. TQL and JK & R both moved for summary judgment. Relevant to this appeal, the trial court found that JK & R was entitled to judgment as a matter of law on TQL’s claim against JK & R for the loss of the apples. TQL now appeals, raising three assignments of error for review. For ease of discussion, we will address the assignments of error out of order.

{ ¶ 6} Assignment of Error No. 2:

{ ¶ 7} THE TRIAL COURT ERRED BY GRANTING DEFENDANT-APPELLEE’S MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF-APPELLANT’S BREACH OF CONTRACT CLAIM RELATING TO CARGO LOSS AND DAMAGE CAUSED BY DEFENDANT AND IT ALSO ERRED BY DENYING AND [sic] PLAINTIFF-APPELLANT’S MOTION FOR SUMMARY JUDGMENT ON ITS BREACH OF CONTRACT CLAIM.

{ ¶ 8} Assignment of Error No. 3:

{ ¶ 9} THE TRIAL COURT ERRED BY GRANTING DEFENDANT-APPELLEE’S MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF-APPELLANT’S BREACH OF CONTRACT CLAIM RELATING TO CARGO LOSS AND DAMAGE CAUSED BY DEFENDANT FINDING THAT NO GENUINE ISSUES OF MATERIAL FACT EXISTED WITH RESPECT TO THE SECOND GLOBE FACTOR.

{ ¶ 10} We will address TQL’s second and third assignments of error together. This court reviews summary judgment decisions de novo. Ludwigsen v. Lakeside Plaza, L.L.C., 12th Dist. Madison No. CA2014-03-008, 2014-Ohio-5493, ¶ 8. Pursuant to Civ.R. 56(C), summary judgment is proper when (1) there are no genuine issues of material fact to be litigated, (2) the moving party is entitled to judgment as a matter of law and, (3) when all evidence is construed most strongly in favor of the nonmoving party, reasonable minds can come to only one conclusion, and that conclusion is adverse to the nonmoving party. Zivich v. Mentor Soccer Club, Inc., 82 Ohio St. 3d 367, 369-70 (1998).

*2 { ¶ 11} The moving party bears the initial burden of informing the court of the basis for the motion and demonstrating the absence of a genuine issue of material fact. Robinson v. Cameron, 12th Dist. Butler No. CA2014-09-191, 2015-Ohio-1486, ¶ 9. Once this burden is met, the nonmoving party has a reciprocal burden to set forth specific facts showing there is some genuine issue of material fact yet remaining for the trier of fact to resolve. Id. In determining whether a genuine issue of material fact exists, the evidence must be construed in favor of the nonmoving party. Vanderbilt v. Pier 27, L.L.C., 12th Dist. Butler No. CA2013-02-029, 2013-Ohio-5205, ¶ 8.

{ ¶ 12} TQL sought damages for the cargo loss that occurred while the apples were in possession of JK & R. The trial court noted that such claims are typically resolved under the Carmack Amendment. See Total Quality Logistics, L.L.C. v. Red Chamber Co., 12th Dist. Clermont No. CA2016-09-062, 2017-Ohio-4369, ¶ 11. However, in this case, TQL pursued its claims against JK & R solely on the basis of the broker-carrier agreement.1 As a result, the trial court construed the terms of the parties’ contractual obligations.

{ ¶ 13} TQL argues that the terms contained in the broker-carrier agreement demonstrate that it is entitled to be indemnified by JK & R. Pursuant to Section 8:
8. CARGO LIABILITY AND CLAIMS. * * * CARRIER is fully responsible and liable for the freight once in possession of it, and the trailer(s) is loaded, even partially, regardless of whether a bill of lading has been issued, signed, and/or delivered to CARRIER. CARRIER’S responsibility/liability shall continue until proper and timely delivery of the shipment to the consignee and the consignee signs the bill of lading or delivery receipt evidencing successful delivery.
10. INDEMNIFICATION. CARRIER agrees to defend, indemnify, and hold BROKER and CUSTOMERS harmless from and against any and all claims or liability * * * arising out of or in any way related to CARRIER’S negligence, willful misconduct, acts, omissions, or performance or failure to perform under this Agreement, including, without limitation, claims or liability for cargo loss and damage, theft, delay, damage to property, and bodily injury and/or death.

{ ¶ 14} Because TQL asserts that JK & R is liable for the loss of apples under a theory of contractual indemnification, the trial court found that the claim must comply with the principles of indemnity under Ohio law.
Indemnity shifts the entire loss from one who has been compelled to make payment to the plaintiff to another who is deemed responsible for reimbursing the full amount. The right to indemnity exists when the relationship between the parties requires one to bear the loss for the other. This right may arise from common law, contract, or in some cases, statutes. When a judgment is obtained against the indemnitee, an indemnitor who has been given proper notice and an opportunity to defend the action falls in that class of non-parties who are bound by the outcome.
Portsmouth Ins. Agency v. Med. Mut. of Ohio, 188 Ohio App.3d 111, 2009-Ohio-941, ¶ 16 (4th Dist.)

{ ¶ 15} The Supreme Court of Ohio has stated that when an indemnitee settles a claim, instead of litigating it, the indemnitee is entitled to indemnification if the indemnitee shows (1) that the indemnitee has given proper and timely notice to the party from whom indemnity is sought, (2) that the indemnitee was legally liable to respond to the settled claim, and (3) that the settlement was fair and reasonable. Brown v. Gallagher, 4th Dist. Ross No. 12CA3332, 2013-Ohio-2323, ¶ 13, citing Globe Indemn. Co. v. Schmitt, 142 Ohio St. 595 (1944), paragraph four of the syllabus.

*3 { ¶ 16} Initially, TQL argues that Globe and its progeny do not apply because of the express contractual provision contained in the broker-carrier agreement. TQL maintains that Globe applies to implied indemnification as a “default used to provide a fair process to parties who did not knowingly or voluntarily accept indemnification.” However, we find TQL’s argument to be unpersuasive. As recently held by the Seventh District Court of Appeals, the Globe factors apply to cases involving written indemnification. Wildcat Drilling, L.L.C. v. Discovery Oil and Gas, L.L.C., 7th Dist. Mahoning No. 17 MA 0018, 2018-Ohio-4015. We agree with the sentiment therein and find that, in order to prevail on its claim, TQL must satisfy the appropriate burden under the Globe analysis.

{ ¶ 17} In the present case, the trial court found that TQL failed to establish the second Globe factor that requires a showing that TQL was legally liable to respond to the settled claim. In so doing, the trial court noted that TQL only made conclusory statements regarding the obligation to pay Contel Fresh. TQL cited the affidavit of Marc Bostwick, TQL’s corporate representative, in support of its obligation to pay. However, the trial court found that Bostwick’s affidavit failed to mention that TQL was required to make payment to Contel Fresh. Instead the affidavit merely indicated that “TQL reimbursed its customer Contel Fresh, for the loss for the apples which amounted to $86,240.” Furthermore, the trial court referenced Bostwick’s deposition testimony regarding TQL’s liability to Contel Fresh:
Q. Did – -and you said that – – did TQL have any contract to pay Contel if the load was damaged or in transportation?
A. Not that I’m aware of.
Q. Is it common for TQL to pay its customer’s claims?
A. It’s – – each claim is on an individual basis. I mean, we don’t always pay a claim. We don’t always turn one down either. It just depends on a lot of different factors.
Q. Well, what I’m trying to get at is, why didn’t TQL tell Contel Fresh the apples burned up during transportation with JK & R Express, submit a claim to JK & R Express?
A. Well, we’re the ones that chose JK & R or arranged it with them, or JK & R chose us, I don’t know which, but. And oftentimes, when you – – if you don’t – – if Contel wanted to be paid from TQL and we had not allowed that or told them no or whatever, we probably wouldn’t continue to do business with Contel.
Q. Okay.
A. Probably.
Q. So it was a business consideration?
A. That would be one of the factors for sure.

{ ¶ 18} The trial court further examined the remaining evidence and concluded that TQL failed to support its conclusory statement that it was required to pay Contel Fresh. In so doing, the trial court noted:
TQL does not claim that it had an ownership interest in the apples. There is no evidence in the record that Contel Fresh initiated an action against TQL for the loss of the apples or that Contel Fresh obtained a judgment against TQL for the loss. If TQL entered into a settlement agreement with Contel Fresh, it must satisfy the three-part test announced by the Ohio Supreme Court in Globe Indemn. Co.

{ ¶ 19} Following review, we agree with the trial court’s decision that there are no genuine issues of material fact with respect to the second Globe factor and thus judgment was appropriately granted in favor of JK & R. As noted by the trial court, TQL failed to show that it was legally liable to respond to the settled claim involving Contel Fresh. Though the broker-carrier agreement provided for terms of indemnification between TQL and JK & R, TQL has not presented any evidence that it had any liability to Contel Fresh for the loss of the apples.

*4 { ¶ 20} On appeal, TQL emphasizes that Contel Fresh submitted an invoice to TQL demanding payment for the loss of the apples and maintains that the “invoice is a commercial document that is submitted for purposes of payment. Therefore, TQL was obligated to respond to this invoice.”

{ ¶ 21} Nevertheless, contrary to TQL’s argument, merely because Contel Fresh demanded payment does not mean it was entitled to such under the terms of the written agreement. “Globe does not speak in terms of potential liability.” Blair v. Mann, 4th Dist. Lawrence No. 98CA35, 1999 Ohio App. LEXIS 1630, at *7 (Apr. 8, 1999). Rather, to recover indemnity following a voluntary payment, “it must appear that the party paying was himself legally liable and could have been compelled to satisfy the claim.” Id. Here, TQL has not shown that it was legally liable to pay for the loss of the apples.2 Therefore, TQL’s claim fails the second Globe factor. As a result, the trial court did not err by denying TQL’s motion for summary judgment or by granting JK & R’s motion for summary judgment. TQL’s second and third assignments of error are overruled.

{ ¶ 22} Assignment of Error No. 1:

{ ¶ 23} THE TRIAL COURT ERRED BY GRANTING DEFENDANT-APPELLEE’S MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF-APPELLANT’S BREACH OF CONTRACT CLAIM BASED UPON PLAINTIFF-APPELLANT’S PURPORTED FAILURE TO ADDRESS THE SECOND GLOBE FACTOR BECAUSE DEFENDANT-APPELLEE DID NOT RAISE THE SECOND GLOBE FACTOR, OR ANY OTHER GLOBE FACTOR, AS A BASIS FOR ITS MOTION FOR SUMMARY JUDGMENT.

{ ¶ 24} In its first assignment of error, TQL argues the trial court erred by granting summary judgment in favor of JK & R based on a failure to establish any genuine issue of material fact as to the second Globe factor. In so doing, TQL alleges that JK & R did not argue the Globe factors as a basis for summary judgment and therefore they were not properly put on notice of the argument prior to the trial court’s decision. We disagree.

{ ¶ 25} As this court recently stated, “[a] party seeking summary judgment must specifically delineate the basis upon which summary judgment is sought in order to allow the opposing party a meaningful opportunity to respond.” Total Quality Logistics, 2017-Ohio-4369 at ¶ 9, citing Mitseff v. Wheeler, 38 Ohio St.3d 112 (1988), paragraph one of the syllabus. “A trial court, generally, may not sua sponte grant summary judgment upon grounds not raised by the prevailing party.” Id. However, a trial court does not deprive a party of a meaningful opportunity to respond where the party has notice of an issue. Ballinger v. Leaniz Roofing, Ltd., 10th Dist. Franklin No. 07AP-696, 2008-Ohio-1421, ¶ 22.

{ ¶ 26} Thus, the inquiry requires this court to examine the substance of the motion for summary judgment in the context of the statute to determine whether notice was present. Total Quality Logistics at ¶ 10. In the present case, TQL argues the trial court erred by finding that TQL failed to establish the second Globe factor because JK & R never raised the issue or even mention the Globe factors in its motion for summary judgment. Therefore, TQL maintains “[g]iven that JK & R never raised the second Globe factor as a basis for its summary judgment motion, TQL was not put on notice that it needed to present evidence as to the second Globe factor (or any Globe factor) in its memorandum in opposition.”

*5 { ¶ 27} We find TQL’s argument to be without merit, as TQL had notice of the relevant issue and the trial court did not sua sponte grant summary judgment on an issue not raised. As noted above, TQL asserted its claim for indemnification and therefore was required to comply with the principles of indemnity under Ohio law. The second Globe factor requires a showing “that the indemnitee was legally liable to respond to the settled claim.” Globe Indemn. Co., 142 Ohio St. 595 at paragraph four of the syllabus.

{ ¶ 28} In this case, JK & R argued in both its motion for summary judgment and in its memorandum in opposition to TQL’s motion for summary judgment that TQL was not obligated to pay Contel Fresh’s claim. For example, in its motion for summary judgment JK & R specifically stated “TQL should not have paid its customer because its customer’s claim was not valid and TQL had no obligation to pay.” Furthermore, JK & R also argued that “TQL made a business decision to pay Contel Fresh as not to lose Contel Fresh’s business.” Both JK & R’s motion for summary judgment and memorandum in opposition to summary judgment raise, liberally, the argument that TQL was not legally liable to respond to the settled claim and thus the second Globe factor. As a result, we find that TQL was put on notice of the relevant issue and was not deprived of a meaningful opportunity to respond. Therefore, TQL’s first assignment of error is overruled.

{ ¶ 29} Judgment affirmed.

PIPER and M. POWELL, JJ., concur.
All Citations
Slip Copy, 2019 WL 115204, 2019 -Ohio- 20

Footnotes

1
It is uncontested that TQL is a broker, not a shipper. TQL pursued this claim solely on the basis of the broker-carrier agreement. In its reply brief before the trial court, TQL stated that it was not suing under the Carmack Amendment or under the Release and Assignment that TQL’s customer provided it.

2
During oral argument, the parties addressed the issue of potential unfairness that may arise since TQL made payment to Contel Fresh for a claim that JK & R may otherwise have been responsible for under the Carmack Amendment had Contel Fresh made the claim directly against JK & R. Though JK & R ultimately received a benefit from this arrangement, this court cannot construe the contract to provide for the relief requested by TQL. There is no other theory of recovery currently before this court.

2018 WL 6790487

United States District Court, N.D. Illinois, Eastern Division.
STARR INDEMNITY & LIABILITY COMPANY a/s/o CESSNA AIRCRAFT COMPANY, Plaintiff,
v.
YRC, INC., Defendant.
Case No. 15-cv-6902
|
Filed: 12/26/2018

MEMORANDUM OPINION AND ORDER
Robert M. Dow, Jr. United States District Judge
*1 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.]

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 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.]

*2 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. §§ 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 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.

A. 49 U.S.C. § 14704
*3 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 phrase clearly “refers to Part B of Subtitle IV of Title 49, 49 U.S.C. §§ 13101–14914.” Starr Indem. & Liab. Co. v. YRC, Inc., 2018 WL 905523, at *3 (N.D. Ill. Feb. 15, 2018) (citing Owner-Operator Indep. Drivers Ass’n, Inc. v. New Prime, Inc., 250 F. Supp. 2d 1151, 1156 (W.D. Mo. 2001), and 49 U.S.C. § 14704(a)(2)). Thus, to state a claim under § 14704(a), Plaintiff must point to a violation of Part B of Subtitle IV or regulations promulgated thereunder.

As an initial matter, the Court has not been able to locate, nor has Plaintiff cited, any cases seeking relief under § 14704(a)(2) involving alleged violations of any FMSCR or allegations of lost or damaged goods. Additionally, as the Court previously explained, the federal cases that Plaintiff previously has cited as explicitly or implicitly recognizing a private right of action under § 14704(a)(2) involved either alleged violations of the statutory provisions of “this part” of the U.S. Code, Part B of Subtitle IV, or alleged violations of the “truth-in-leasing” regulations set by the Federal Motor Carrier Safety Administration (“FMCSA”), 49 C.F.R. Part 376, which were promulgated under the statutory authority of “this part” of the U.S. Code, Part B of Subtitle IV. See Starr Indem. & Liab. Co., 2018 WL 905523, at *4 (collecting cases).

Nonetheless, Plaintiff asserts that the Relevant FMCSRs were promulgated under 49 U.S.C. § 13902—which falls within Part B of Subtitle IV—rendering any violations of the Relevant FMCSRs actionable under § 14704(a)(2). In support of this claim, Plaintiff points to the authority citation for 49 C.F.R. Part 392 (“Part 392”):
Authority: 49 U.S.C. 504, 13902, 31136, 31151, 31502; Section 112 of Pub.L. 103–311, 108 Stat. 1673, 1676 (1994), as amended by sec. 32509 of Pub.L. 112–141, 126 Stat. 405, 805 (2012); sec. 5524 of Pub.L. 114–94, 129 Stat. 1312, 1560; and 49 CFR 1.87.
Plaintiff asserts that the authority citation conclusively establishes that the Relevant FMCSRs—which all fall within or were allegedly incorporated by Part 392—were promulgated under 49 U.S.C. § 13902. [72, at 7–8.] Defendant points to the Federal Register entries that initially codified the Relevant FMCSRs, which do not include citations to § 13902, as proof to the contrary. [68, at 4–6.]

*4 Both parties are correct at least in part. At least one regulation within Part 392 was promulgated under § 13902; however, the Relevant FMCSRs were not.

B. 49 C.F.R. Part 392
Section 21.40 of Title 1 of the Code of Federal Regulations (“the CFR”) states “[e]ach section in a document subject to codification must include, or be covered by, a complete citation of the authority under which the section is issued * * *.” 1 C.F.R. § 21.40. Therefore, agencies must “present a centralized authority citation * * * at the end of the table of contents for a part or after each subpart heading within the text of a part” in their codified materials. 1 C.F.R. § 21.43(b). However, the “[c]itations of authority for particular sections may [, or may not,] be specified within the centralized authority citation.” Id.

Additionally, every agency must formally amend the authority citations in their codified material to reflect any changes in the regulations or the authority under which they are promulgated. 1 C.F.R. § 21.41(b). Importantly for this case,
The requirements for placing authority citations vary with the type of amendment the agency is making in a document. * * * If a document sets out an entire CFR part, the agency shall place the complete authority citation directly after the table of contents and before the regulatory text. If a document amends only certain sections within a CFR part, the agency shall present the complete authority citation to this part as the first item in the list of amendments. If the authority for issuing an amendment is the same as the authority listed for the whole CFR part, the agency shall simply restate the authority. If the authority for issuing an amendment changes the authority citation for the whole CFR part, the agency shall revise the authority citation in its entirety. The agency may specify the particular authority under which certain sections are amended in the revised authority citation.
1 C.F.R. §§ 21.43(a)(1–2) (emphasis added). Because an authority citation covers an entire part and may or may not specify which authorities correspond with which regulations within that part, the fact that a statute appears in the authority citation of a given part of the CFR does not conclusively establish, as Plaintiff asserts, that every regulation within that part was promulgated under that statute Cf. Paralyzed Veterans of Am. v. U.S. Dep’t of Transportation, 286 F. Supp. 3d 111, 114–116 (D.D.C. 2017) (disregarding a rule’s authority citation and concluding that the rule was issued under a mistakenly omitted authority for purposes of ascertaining the court’s jurisdiction under a direct-review statute). Here, the history of Part 392’s authority citation shows that the Relevant FMCSRs were not promulgated under § 13902.

Section 13902 first appeared in Part 392’s authority citation after the FMCSA issued an interim final rule prohibiting motor carriers subject to the registration requirements of § 13902 from operating a commercial motor vehicle in interstate commerce without registering with the FMCSA. 67 FR 55162, 55165 (Aug. 28, 2002); compare 49 C.F.R. Part 392 (Oct. 2001) (“AUTHORITY: 49 U.S.C. 31136 and 31502; and 49 CFR 1.73”); with 49 C.F.R. Part 392 (Oct. 2002) (“AUTHORITY: 49 U.S.C. 13902, 31136, 31502; and 49 CFR 1.73.”). The text of that interim final rule—codified at 49 C.F.R. § 392.9a, directly referenced § 13902: “A motor vehicle providing transportation requiring registration under 49 U.S.C. 13902 may not be operated without the required registration or operated beyond the scope of its registration.”6 67 FR at 55165 (creating 49 C.F.R. § 392.9a(a)).

*5 All the Relevant FMCSRs within Part 392 were initially codified well before the addition of § 392.9a in August 2002,7 and were not edited in any way by the rulemaking that added § 392.9a, 67 FR at 55165. Additionally, although § 392.9 was last substantively edited in September 2002—after the addition of § 13902 to Part 392’s authority citation and thus theoretically promulgated under § 13902—that September 2002 rulemaking explicitly stated, “The authority citation for part 392 continues to read as follows: Authority: 49 U.S.C. 31136 and 31502; and 49 CFR 1.73.”8 67 FR 61212, 61224 (Sept. 7, 2002). Furthermore in 2007, the last time that the text of § 392.9 was edited in any way, the rulemaking again stated, “The authority citation for part 392 continues to read as follows: Authority: 49 U.S.C. 322, 31136, and 31502; section 1041(b) of Pub. L. 102–240, 105 Stat. 1914, 1993 (1991); and 49 CFR 1.73.” 72 FR 55697, 55703 (Oct. 1, 2007). Given that § 13902 appeared in Part 392’s authority citation at least five years before that revision, § 392.9 cannot have been promulgated under § 13902.

Additionally, in view of the requirement that agencies update the authority citations of their codified material any time the authority for that material changes, 1 C.F.R. § 21.41(b), the fact that the FMCSA did not add § 13902 to Part 392’s authority citation until the codification of § 392.9a in 2002, despite the fact that § 13902 was first codified in 1995, see ICCTA, H.R. 2539, 104th Cong. § 103 (1995), confirms that neither § 392.2 nor § 392.6 were promulgated under § 13902. That § 13902 appears in Part 392’s authority citation as the authorization for at least one section within that part—namely § 392.9a—does not change the analysis. 1 C.F.R. § 21.43. In sum, since the Relevant FMCSRs were not promulgated under § 13902, the only question is whether any of the other authorities now listed in Part 392’s authority citation fall within or were promulgated under Part B of Subtitle IV.

As noted above, the authority citation for Part 392 lists four statutes other than § 13902—49 U.S.C. §§ 504, 31136, 31151, and 31502—and one other provision of the CFR, 49 C.F.R. § 1.87. 49 C.F.R. Part 392 (2017) (authority citation).9 None of the other statutes falls within Part B of Subtitle IV. Similarly, § 1.87 of the CFR simply details the authority of the FMCSA and was promulgated under Chapter 3 of Subtitle I of Title 49 of the United States Code. 49 C.F.R. § 1.87 (Oct. 2017) (citing 49 U.S.C. § 322 as authority).

*6 In sum, in view of the facts that (1) the Relevant FMCSRs were not promulgated under § 13902 and (2) none of the other provisions within Part 392’s authority citation falls within or was promulgated under Part B of Subtitle IV, the Relevant FMCSRs could not have been promulgated under Part B of Subtitle IV. The absence of any case in which violations of FMCSRs have been recognized as claims under the ICCTA supports this conclusion. And because the Relevant FMCSRs were not promulgated under Part B of Subtitle IV, Plaintiff may not state a claim under § 14704 for their violation. 49 U.S.C. § 14704(a)(2). The Court therefore grants Defendant’s motion to dismiss Counts II and III.

IV. Defendant’s Motion for Leave to file a Sur Reply
On June 8, 2018, a month after the motion to dismiss was fully briefed, Plaintiff filed a motion requesting leave to file a sur-reply. [77], [78]. Plaintiff attached the proposed sur-reply to its motion. [78-1.] Having considered the proposed sur-reply in the disposition of Defendant’s motion to dismiss, the Court grants Plaintiff’s motion. Johnny Blastoff, Inc. v. L.A. Rams, 188 F.3d 427, 439 (7th Cir. 1999) (whether to grant a motion for leave to file a sur-reply lies within a district court’s discretion).

V. Conclusion
For the foregoing reasons, Defendant’s motion to dismiss [67] and Plaintiff’s motion for leave to file a sur-reply [78] are granted. Counts II and III are dismissed for failure to state a claim upon which relief may be granted. The case is set for further status on January 10, 2019 at 9:00 a.m.

All Citations
Slip Copy, 2018 WL 6790487

Footnotes

1
For purposes of the motion to dismiss, 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 Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007).

2
Plaintiff’s First and Second Amended Complaints were essentially identical, with the correction of one potentially incorrect citation the only difference. [62, at 2 n.1.]

3
A substantial portion of the parties’ briefing addressed various arguments regarding whether the Carmack Amendment provides the sole source of relief in a case such as this one. However, because the Court has determined that Plaintiff cannot state a claim for the alleged violation of the Relevant FMCSRs under § 14704, see Section III(B) infra, the Court need not address that broader question.

4
The authority citation for 49 C.F.R. Part 393 does not cite § 13902 or any other section within Part B of Subtitle IV. In fact, it lists 49 U.S.C. §§ 31136, 31151, and 31502—all of which fall within Part B of Subtitle VI—among others. 49 C.F.R. Part 393 (authority citation). Plaintiff argues that § 392.2, which allegedly was promulgated under Part B of Subtitle IV, incorporated these sections by reference, rendering them actionable under § 14704(a). [72, at 2, 5–6.] Because the Court concludes that § 392.2 was not promulgated under § 13902, see infra Section III(B), it need not address that argument.

5
Given that § 14704(e) merely provides for the recovery of attorney fees in successful actions under § 14704(a), Plaintiff may state a claim under § 14704(e) if it has a claim under § 14704(a). 49 USC § 14704(e).

6
After revisions in 2006 and 2016, § 392.9a(a) now reads “Operating authority required. A motor vehicle providing transportation requiring operating authority must not be operated—(1) Without the required operating authority or (2) Beyond the scope of the operating authority granted.” 49 C.F.R. § 392.9a(a).

7
Section 392.2 was first codified on May 21, 1970, and last amended on July 28, 1995. 49 C.FR. § 392.2 (2017). Section 392.6 was first codified on December 25, 1968, and last amended on July 28, 1995. 49 C.FR. § 392.6 (2017). Finally, Section § 392.9 has existed in some form since at least 1970, 49 C.F.R. § 392.9 (1970), though it was substantively edited in September 2002, 49 C.FR. § 392.9 (2017) (crediting a 2002 rulemaking for the regulation’s text).

8
In August 2012, § 1.73 was re-codified as § 1.87 whether it remains today. 77 FR 49964, 49982 (Aug. 17, 2012); 49 C.F.R. § 1.87 (2017).

9
The authority citation also lists three enacted federal bills. 49 C.F.R. Part 392 (2017) (authority citation) (“Section 112 of Pub.L. 103–311, 108 Stat. 1673, 1676 (1994), as amended by sec. 32509 of Pub.L. 112–141, 126 Stat. 405, 805 (2012); sec. 5524 of Pub.L. 114–94, 129 Stat. 1312, 1560”). However, each of the bills simply order the Secretary of Transportation to make various revisions to sections of Part 392 irrelevant to the current analysis. See, e.g., Section 112 of Pub.L. 103–311, 108 Stat. 1673, 1676 (1994) (ordering the Secretary of Transportation to revise certain regulations related to grade crossing safety); Section 32509 of Pub.L. 112–141, 126 Stat. 405, 805 (2012) (same); Section 5524 of Pub.L. 114–94, 129 Stat. 1312, 1560 (2015) (ordering the Secretary of Transportation to revise certain regulations related to “exemptions from requirements for certain welding trucks used in pipeline industry”).