2020 WL 7260799

United States District Court, N.D. Illinois, Eastern Division.
QUALITY KING DISTRIBUTORS, INC., Plaintiff,
v.
CELTIC INTERNATIONAL, LLC, Defendant.
Case No. 20-cv-2145
|
12/10/2020

Joan B. Gottschall, United States District Judge

MEMORANDUM OPINION AND ORDER
*1 This suit stems from the alleged partial non-delivery of two shipments of goods. Plaintiff Quality King Distributors, Inc.1 (“Quality King”), a shipper, filed a two-count complaint for breach of contract in state court against Celtic International, LLC (“Celtic”). Compl. 1, ECF No. 14-1. The complaint’s allegations are straightforward. On March 16 and April 21, 2016, Quality King contracted with Celtic to pick up two separate shipments of goods as set forth in the bills of lading for the shipments and deliver the shipments to Quality King’s warehouse in the Chicago area. See Compl. ¶¶ 4, 17. “A bill of lading ‘records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage.’ ” Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89, 93 (2010) (quoting Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 18–19 (2004)). Celtic contracted with its shipping agent, non-defendant GSN Trucking, Inc. (“GSN”), to deliver the shipments. Compl. ¶¶ 5, 19. The bills of lading attached to the complaint list GSN as the shipper. See Compl. Ex. A at 1. GSN picked up the shipments, but not all of the goods were delivered to Quality King’s warehouse, causing Quality King to be short $33,128.34 (first shipment) and $29,522.16 (second shipment). See Compl. ¶¶ 5–14, 19–26.

Celtic removed this case to this court on the theory that the Carmack Amendment to the Interstate Commerce Act (“Carmack Amendment”), 49 U.S.C. § 14706, preempts Quality King’s breach of contract claims. Notice of Removal ¶ 4–7, ECF No. 1; see also Kawasaki, 561 U.S. at 107–09 (describing the history of the Carmack Amendment). The court has before it Celtic’s motion to dismiss the complaint for failure to state a claim against it. See Fed. R. Civ. P. 12(b)(6). The parties dispute whether the Carmack Amendment preempts Quality King’s claims and, if so, whether the complaint states a claim under the Carmack Amendment.

The parties’ preemption arguments raise a question of this court’s subject matter jurisdiction. “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Celtic removed this case on the theory that it arises under federal law for purposes of 28 U.S.C. § 1331. Notice of Removal ¶¶ 4, ECF No. 1. “Ordinarily a court determines whether there is federal question jurisdiction by examining the plaintiff’s well-pleaded complaint, for “[i]t is long-settled law that a cause of action arises under federal law only when the plaintiff’s well pleaded complaint raise[s] issues of federal law.” Rice v. Panchal, 65 F.3d 637, 639 (7th Cir. 1995) (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)).

In its complaint filed in state court, Quality King pleaded two breach of contract claims under Illinois law. Compl. 1–3. Neither claim explicitly pleads an issue arising under federal law, so neither satisfies the well-pleaded complaint rule. Celtic does not argue otherwise. See Notice of Removal ¶¶ 4–9; see also Rice, 65 F.3d at 639 (explaining that “the plaintiff may, by eschewing claims based on federal law, choose to have the cause heard in state court” (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 398–99 (1987)). However, Quality King invokes the doctrine of field preemption. Notice of Removal ¶¶ 4–9. Under the doctrine of complete or field preemption, a case arising under state law may nevertheless be removed “where there is a congressional intent in the enactment of a federal statute not just to provide a federal defense to a state created cause of action but to grant a defendant the ability to remove the adjudication of the cause of action to a federal court by transforming the state cause of action into a federal cause of action.” Rogers v. Tyson Foods, Inc., 308 F.3d 785, 788 (7th Cir. 2002) (citation and internal quotation omitted); see also Rice, 65 F.3d at 639–640; Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 104 n.2. (1992); Brunner v. Beltmann Grp. Inc., 2020 WL 635905, at *3 (N.D. Ill. Feb. 11, 2020) (citing Di Joseph v. Standard Ins. Co., 776 Fed. Appx. 343, 347 (7th Cir. 2019)) (collecting authority holding that Carmack Amendment claims may be removed under the field preemption doctrine).

*2 “The preemptive sweep of the Carmack Amendment extends to state causes of action against carriers ‘where goods are damaged or lost in interstate commerce.’ ” REI Transp., Inc. v. C.H. Robinson Worldwide, Inc., 519 F.3d 693, 697–98 (7th Cir. 2008) (quoting Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1414 (7th Cir. 1987)). Thus, whether this case arises under federal law depends on whether the Carmack Amendment preempts Quality King’s breach of contract claims. See Rogers, 308 F.3d at 788; Brunner, 2020 WL 635905, at *2–5 (analyzing Carmack Amendment preemption on motion to remand); Korer v. Danita Corp., 584 F. Supp. 2d 1103, 1105 (N.D. Ill. 2008) (determining whether removal was proper by asking whether the Carmack Amendment preempted the plaintiff’s state law claims); Ducham v. Reebie Allied Moving & Storage, Inc., 372 F. Supp. 2d 1076, 1077 (N.D. Ill. 2005) (remanding for lack of subject matter jurisdiction because the Carmack Amendment did not preempt the plaintiff’s state law claims); V.R. Compounding Corp. v. Occidental Chem. Corp., 2000 WL 1368045, at *2–5 (N.D. Ill. Sept. 15, 2000) (analyzing Carmack Amendment preemption on motion to remand).

Ordinarily, the complaint’s well-pleaded facts must be accepted as true when deciding a Rule 12(b)(6) motion to dismiss the complaint for failure to state a claim. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). But because the preemption issue is jurisdictional here and Celtic attacks the complaint’s factual allegations that it was a shipper of goods, “[t]he law is clear that when considering a motion that launches a factual attack against jurisdiction, ‘[t]he district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.’ ” Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009) (quoting Evers v. Astrue, 536 F.3d 651, 656–57 (7th Cir. 2008)) (other citation omitted); see also id. (explaining the differences between Rule 12(b)(6) motions and motions factually attacking jurisdiction).

The fact that Celtic was a freight broker for the shipments at issue is undisputed before this court. Quality King maintains that its “State Lawsuit against the Defendant, who is a freight broker, is not preempted.” Resp. to Mot. to Dismiss 2, ECF No. 18. On the merits, Celtic argues that “plaintiff’s claims must…be dismissed because Celtic is a freight broker to which the Carmack [Amendment] does not apply.” Mot. to Dismiss 4, ECF No. 14. The parties therefore agree before this court that Celtic is a freight broker and not a carrier, despite any arguably contrary allegations in the complaint.2 Id. at 2, 4–6; Resp. to Mot. to Dismiss 2, 3–6.

The dispositive jurisdictional question therefore becomes whether the Carmack Amendment preempts Quality King’s breach of contract claims against a freight broker. The text of the Carmack Amendment reads in part:
A carrier providing transportation or service…shall issue a receipt or bill of lading for property it receives for transportation under this part. That carrier and any other carrier that delivers the property and is providing transportation or service…are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported in the United States….
*3 49 U.S.C. § 14706(a)(1).

The Carmack Amendment’s purpose is to relieve cargo owners “of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.” Kawasaki, 561 U.S. at 98 (quoting Reider v. Thompson, 339 U.S. 113, 119 (1950)). Thus, the Supreme Court and the Seventh Circuit have held that under the Carmack Amendment “a common carrier is liable for all losses which occurred while the goods were being transported by it, unless the carrier can demonstrate it is free from fault.” Allied Tube & Conduit Corp. v. S. Pac. Transp. Co., 211 F.3d 367, 369 (7th Cir. 2000) (quoting Pharma Bio, Inc. v. TNT Holland Motor Express, Inc., 102 F.3d 914, 916 (7th Cir. 1996)).

Furthermore, “the Carmack Amendment preempts all state law claims based upon the contract of carriage, in which the harm arises out of the loss of or damage to goods.” Gordon v. United Van Lines, Inc., 130 F.3d 282, 284 (7th Cir. 1997) (citing Hughes, 829 F.2d at 1407). But “claims involving a separate and independently actionable harm to the shipper distinct from such damage are not preempted.” Id. (citing N. Am. Van Lines, Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452 (7th Cir. 1996)). The Seventh Circuit has expressly held “that the Carmack Amendment does not preempt all claims by a carrier against a shipper or other ‘person entitled to recover’ for non-payment.” REI Transp. 519 F.3d at 697.

The parties use the terms “broker” and “motor carrier” as they are defined in the statute. The term “carrier” refers to one of three other defined terms: “[t]he term ‘carrier’ means a motor carrier, a water carrier, and a freight forwarder.” 49 U.S.C. § 13102(3). In turn, “[t]he term ‘motor carrier’ means a person providing motor vehicle transportation for compensation.” § 13102(14). The definition of “broker” excludes motor carriers—one who “sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.’ ” § 13102(2).

Consistent with these definitions, several courts in this district have held that the Carmack Amendment does not preempt state law claims against a broker, such as a claim for the breach of a duty to place a shipment with a reliable and adequately insured carrier. E.g., Sompo Japan Ins. Co. v. B & H Freight Inc., 177 F. Supp.3d 1084, 1086–87 (N.D. Ill. 2016); Custom Cartage, Inc., v. Motorola, Inc., 1999 WL 89563, at *3 (N.D. Ill. Feb. 16, 1999) (collecting additional cases); see also Brunner 2020 WL 635905, at *6; Traffic Tech, Inc. v. Arts Transp., Inc., 2016 WL 1270496, at *3 (N.D. Ill. 2016). Celtic cites no contrary authority, and the court has located none.

Rather, Celtic attempts to distinguish cases like Sompo Japan because the plaintiff’s complaint in that case sounded in tort rather than contract. Reply 3–4, ECF No. 20. No authority is cited supporting this distinction. See id. Nor does this court find the distinction persuasive. Nothing in the preemption analysis of cases such as Sompo Japan turns on the source of the state law duty imposed on a broker. See Sompo Japan, 177 F. Supp.3d at 1086–87. Rather, the text and structure of the Carmack Amendment, including the definitions quoted above, compel the conclusion that claims against brokers are not preempted. See id.; Brunner, 2020 WL 635905, at *6; Custom Cartage, 1999 WL 89563, at *3. This conclusion accords with the Seventh Circuit’s description of Carmack Amendment preemption in REI Transport, the most recent case to take up the subject: “The Carmack Amendment only preempts state and common law remedies inconsistent with the federal act. These inconsistent remedies consist of state statutory or common law [claims] against a carrier for damages to the shipper’s goods that have been transferred in interstate commerce.” 519 F.3d at 698 (emphasis added; internal quotations omitted). This court therefore holds that the Carmack Amendment does not preempt claims against a party acting solely as a broker as that term is defined in 49 U.S.C. § 13102(2).

*4 For the reasons stated, this case is remanded to the Circuit Court of Cook County, Illinois, under 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction. Celtic’s motion to dismiss the complaint, ECF No. 14, is denied without prejudice to renewal in state court.

Dated: December 10, 2020 /s/

Joan B. Gottschall

United States District Judge
All Citations
Slip Copy, 2020 WL 7260799

Footnotes

1
The parties spell plaintiff’s name slightly differently. Compare Compl. 1, with Notice of Removal 1 (spelling of “distributors”). This order uses plaintiff’s spelling.

2
As Celtic repeatedly notes, the bills of lading list GNS as the shipper and do not name Celtic at all. See Compl. Ex. A at 1. The fact that a party’s name does not appear on a bill of lading is important, but it is not dispositive of whether the party was a carrier under the Carmack amendment. See Indep. Mach., Inc. v. Kuehne & Nagel, Inc., 867 F. Supp. 752, 759–60 (N.D. Ill. 1994).

2020 WL 7237282

United States District Court, S.D. Ohio, Eastern Division.
GO-TO TRANSPORT, INC., Movant,
v.
DMAX LTD., Non-Movant.
Case No. 2:20-mc-38
|
Signed 12/09/2020
Attorneys and Law Firms
Timothy P. Roth, Gallagher Sharp, Cleveland, OH, Mohammad Salman Shah, Gallagher Sharp LLP, Columbus, OH, for Movant.
Clay A. Guise, Dykema Gossett PLLC, Bloomfield Hills, MI, Robert Hugh Ellis, Pro Hac Vice, Dykema Gossett PLLC, Detroit, MI, for Non-Movant.

OPINION AND ORDER
KIMBERLY A. JOLSON, UNITED STATES MAGISTRATE JUDGE
*1 This matter is before the Court on Movant Go-To Transport, Inc.’s (“Go-To”) Verified Rule 27 Petition (Doc. 1). For the reasons that follow, the Petition is GRANTED.

I. BACKGROUND
On November 23, 2020, the Court denied without prejudice Go-To’s Verified Rule 27 Petition because it failed to file a reply brief addressing Non-Movant DMAX Ltd.’s (“DMAX”) arguments in response—specifically, DMAX’s argument that the Petition was premature. (See generally Doc. 8). Subsequently, the Court granted the parties’ motion to set aside that ruling so Go-To could file its reply brief. (Doc. 10). That reply brief was filed (Doc. 11), making the matter once again ripe for review.

Go-To filed the instant Petition because it anticipates litigation related to an accident one of its drivers, Joseph Taylor, had on May 22, 2020. Mr. Taylor was driving one of Go-To’s tractor trailers, and no other vehicle—or driver—was involved. At the time, Go-To was transporting DMAX’s cargo, and the cargo was meaningfully damaged. (See Doc. 1). Following the accident, Go-To submitted an insurance claim for the damage to DMAX’s cargo, but that claim was denied. (Id. at 3). As a result, Go-To “expects to be named as a defendant in litigation” for DMAX’s damaged cargo. (Id.). Given this posture, Go-To views Mr. Taylor’s testimony regarding the accident as essential. (Id. at 2). But unfortunately, in July 2020—just two months after the accident in question—Mr. Taylor was diagnosed with amyotrophic lateral sclerosis (“ALS”). (Id.). “Mr. Taylor has stopped working because of his condition and has begun to slur his words.” (Id.). Given this posture, Go-To seeks to perpetuate Mr. Taylor’s testimony now.

II. STANDARD
Rule 27(a) of the Federal Rules of Civil Procedure governs the taking of depositions before an action is commenced. To perpetuate such testimony, the moving party must: (1) demonstrate that it expects to be a party to an action cognizable in the federal courts, but cannot presently bring it or cause it to be brought; (2) explain the subject matter of the expected action; (3) describe the facts it intends to establish through the desired testimony and the reasons for needing to perpetuate that testimony; (4) identify the adverse parties in the expected action and the parties to be deposed; and (5) serve the petition in accordance with applicable rules. Fed. R. Civ. P. 27(a)(1).

A Court will grant a Rule 27 petition if it is “satisfied that perpetuating the testimony may prevent a failure or delay of justice …” Fed. R. Civ. P. 27(a)(3). In making such a determination, the court considers three factors. First, the testimony to be perpetuated “must be relevant, not simply cumulative, and likely to provide material distinctly useful to a finder of fact.” In re Bay Cty. Middlegrounds Landfill Site, 171 F.3d 1044, 1047 (6th Cir. 1999). Second, the moving party must demonstrate a “risk of permanent loss of the desired testimony.” In re Andrews, 2011 WL 7168675 at *1 (S.D. Ohio Dec. 2, 2011). While a witness’s old age or deteriorating health have been frequently accepted as grounds for such a conclusion, any such showing must be more than a “general allegation.” DRFP, LLC v. Republica Bolivariana de Venezuela, No. 2:04-CV-793, 2009 WL 4281261, at *1 (S.D. Ohio Nov. 24, 2009) (citing Penn Mut. Life Ins. Co. v. United States, 68 F.3d 1371, 1374 (D.C. Cir. 1995)) (denying movant’s petition when it simply alleged that the deponent was retired and his “ability to recall relevant facts and testify completely…. may be impaired”). Third, the testimony to be perpetuated must “be set forth in some detail because a preservation deposition may not be used as a substitute for discovery.” Id. (citing In re Ramirez, 241 F.R.D. 595 (W.D. Tex. 2006)).

III. DISCUSSION
*2 The Court begins its analysis by evaluating the Petition’s compliance with the individual requirements in Rule 27(a)(1)(A–E) and then turns to 27(a)(3)’s “failure or delay of justice” standard.

A. Go-To’s Expectations
In its Petition, Go-To asserts that it “expects to be a party to an action cognizable in a United States court but cannot presently bring it or cause it to be brought.” (Doc. 1 at 4). Go-To expressly identifies a potential civil action arising from the May 22, 2020, accident involving Mr. Taylor. (Id. at 5). That potential action would be brought under the Carmack Amendment (49 U.S.C. § 14706), which holds a carrier providing transportation liable to a shipper for damage done to cargo hauled in interstate commerce. 49 U.S.C. § 14706(a)(1). DMAX contends that Go-To has filed its Petition prematurely “because, as of yet, no such demand has been made …” (Doc. 3 at 3).

But this is the type of situation that Rule 27(a)(1)(A) contemplates. The Rule does not require a party to demonstrate that litigation is an absolute certainty in order to perpetuate testimony. See In re Bay Cty. Middlegrounds Landfill Site, 171 F.3d at 1046 (citing Penn Mut. Life Ins. Co., 68 F.3d at 1374). Here, Go-To has demonstrated reasonable cause to expect to be a party to an action, brought under the relevant provisions of the Carmack Amendment, because federal jurisdiction would exist for such a contemplated action as they are a motor carrier subject to the Department of Transportation’s jurisdiction, and the cargo at issue was traveling in interstate commerce. See Dresser Indus v. United States, 596 F.2d 1231, 1238, reh’g denied, 601 F.2d 586 (5th Cir. 1979), cert. denied, 444 U.S. 1044 (1980) (requiring a showing that federal jurisdiction would exist in the contemplated action). Accordingly, Go-To has demonstrated facts sufficient to show that it may be a party to an action cognizable in a United States court but cannot presently bring it or cause it to be brought.

DMAX’s contention that “Go-To is certainly free to seek a declaratory judgement … concerning its rights and obligations under the controlling contract,” (Doc. 3 at 4) does not impact this determination. See In re Bay Cty. Middlegrounds Landfill Site, 171 F.3d at 1046 (citing Penn Mut. Life Ins. Co., 68 F.3d at 1374) (holding that appellants were still acting in anticipation of litigation, even though they could still have obtained relief from the IRS); see also Martin v. Reynolds Metals Corp., 297 F.2d 49, 55 (9th Cir. 1961) (finding that “[t]he position of one who expects to be made a defendant is different …” in regard to an inability to bring a cognizable action, and holding that “such a defendant should be, and is, entitled to use the Rule, upon a proper showing, to preserve important testimony that might otherwise be lost”). In short, Go-To’s expectations of being sued are enough.

B. Go-To’s Need to Perpetuate Testimony
Rule 27(a)(B) and (C) require that petitioner both explain the subject matter of the expected action as well as describe the facts it intends to establish through the desired testimony and the reasons for needing to perpetuate that testimony. The Petition meets these requirements.

*3 Go-To sufficiently explains the subject matter of the expected action. Such an action arises from the accident and the resulting damaged cargo and would be brought under 49 U.S.C. § 14706(a)(1). (Doc. 1 at 5). And Go-To credibly asserts that the desired testimony will aid in proving that it was “negligence-free and that DMAX’s improper loading of the trailer is the cause of the cargo damage.” (Id. at 6). Finally, Go-To competently describes Mr. Taylor’s deteriorating medical condition, which is the key reason for needing to perpetuate his testimony.

C. Adverse Party and Notice
Briefly, the Court notes that Go-To’s petition has identified both the adverse party in the expected action (DMAX) as well as the party to be deposed (Mr. Taylor) and served the petition in accordance with applicable rules. (See Doc. 1 at 10–11).

D. Rule 27(a)(3)
To grant a Rule 27 petition, the Court must be “satisfied that perpetuating the testimony may prevent a failure or delay of justice.” Fed. R. Civ. P. 27(a)(3). To do so, Go-To must demonstrate both that the testimony is probative as to a key issue, and that there is a risk of permanent loss of the desired testimony. Additionally, the testimony to be perpetuated must “be set forth in some detail because a preservation deposition may not be used as a substitute for discovery.” DRFP, LLC, 2009 WL 42281261 at *1 (citing In re Ramirez, 241 F.R.D. at 595).

First, Go-To has sufficiently shown that the testimony of Mr. Taylor is “relevant, not simply cumulative, and likely to provide material distinctly useful to a finder of fact.” In re Bay Cty. Middlegrounds Landfill Site, 171 F.3d at 1047. Go-To contends that, as the only driver involved in the accident, Mr. Taylor is uniquely positioned to establish that “it was an act of the shipper itself (i.e., DMAX) that caused the damage to the subject cargo.” (Doc. 1 at 6). This could prove a key issue in the prospective suit, because a motor vehicle carrier can escape liability under Carmack for damaged cargo, when a shipper has not “properly prepared [the cargo] for shipment.” Hoover Motor Exp. Co. v. U.S., F.2d 832, 835 (6th Cir. 1959). And, importantly, DMAX does not challenge the importance of Mr. Taylor’s testimony.

Second, the Petition adequately establishes that there is a risk of permanent loss of Mr. Taylor’s testimony. In July of 2020 Mr. Taylor was diagnosed with ALS. (Doc. 1 at 19). According to the declaration of Mr. Taylor’s wife, Mr. Taylor’s disease “will progress over time to the point that he will no longer be able to communicate without the assistance of specialized equipment.” (Id.). Go-To contends that “the failure to preserve Mr. Taylor’s testimony could result in the loss of evidence due to Mr. Taylor’s rapidly-deteriorating medical condition.” (Id. at 7).

The Court agrees. “A witness’s age or health concerns are frequently accepted grounds for concluding that a perpetuation of testimony is necessary.” DRFP, 2009 WL 4281261, at *1 (citing Penn Mut. Life Ins. Co., 68 F.3d at 1374). Given the seriousness of Mr. Taylor’s condition, and the rate at which his health is deteriorating, perpetuating his testimony is appropriate as there is a risk that any such testimony may be permanently lost.

Third, as Rule 27 is not a substitute for discovery, the parameters of Mr. Taylor’s testimony must be set forth in some detail. The Petition meets this final requirement. Go-To is not seeking wide ranging discovery; it is simply seeking the deposition of one key witness. (See generally Doc. 1). Specifically, Go-To is seeking testimony on whether “Mr. Taylor was afforded the opportunity to inspect the load before departure …” (Doc. 1 at 6). The Court has no concerns that the Petition is being used as a “vehicle for discovery prior to filing a complaint.” In re Ramirez, 241 F.R.D. at 595 (denying a Rule 27 petition where “petitioner [did] not delineate any limits to the requested depositions …”).

IV. CONCLUSION
*4 For the foregoing reasons, Go-To’s Verified Rule 27 Petition (Doc. 1) is GRANTED. The parties are DIRECTED to meet and confer and schedule Mr. Taylor’s deposition within forty-five (45) days of the date of this Opinion and Order.

IT IS SO ORDERED.

All Citations
Slip Copy, 2020 WL 7237282