United States District Court,

N.D. Illinois.

SIEMENS TRANSFORMADORES S.A. DE C.V.

v.

SOO LINE RAILROAD CO.

 

No. 10 C 3750.

May 29, 2012.

 

Paul J. Kozacky, Jerome Raymond Weitzel, Jessica Marie Fricke, John Norris Rapp, Kozacky & Weitzel, P.C., Chicago, IL, for Siemens Transformadores S.A. De C.V.

 

Daniel J. Mohan, Alison L. Helin, Daley Mohan Groble P.C., Chicago, IL, for Soo Line Railroad Co.

 

STATEMENT

JOAN H. LEFKOW, Judge.

Siemens Transformadores S.A. de C.V. (“Siemens”) filed suit to recover damages to a transformer that Soo Line Railroad Company, which does business as Canadian Pacific Railway (“Canadian Pacific”), carried between Texas and Ontario. On March 7, 2012, the court granted Siemens’s motion for partial summary judgment and held that Canadian Pacific cannot assert the affirmative defense of a limitation of liability. Canadian Pacific has moved for reconsideration, arguing that the court committed manifest error in concluding that the shipping contract at issue is governed by the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706 (“Carmack Amendment”). Canadian Pacific asserts that the contract is governed instead by 49 U.S.C. § 10709, which, unlike the Carmack Amendment, does not require a carrier to give a shipper a reasonable opportunity to choose full liability protection.

 

Legal Standard

Because the court’s order regarding Canadian Pacific’s affirmative defense is a non-final and non-appealable order, Canadian Pacific’s motion will be considered as a request for reconsideration pursuant to the court’s authority under Rule 54(b). See 10 James Wm. Moore et al., Moore’s Federal Practice—Civil § 54.22; id. § 60.03. Courts in this district generally apply the same standards in reconsidering their decisions under Rules 54(b) and 59(e). See, e.g., Morningware, Inc. v. Hearthware Home Prods., Inc., No. 09 CV 4348, 2011 WL 1376920, at(N.D.Ill. Apr. 12, 2011) (citing Sunrise Opportunities, Inc. v. Regier, No. 05 CV 2825, 2006 WL 581150, atn. 5 (N.D.Ill. Mar. 7, 2006)). The problems warranting the grant of a motion to reconsider are rare. See, e.g., Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir.1990) (citation omitted). The motion is appropriate, however, where “the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension. A further basis for a motion to reconsider would be a controlling or significant change in the law or facts since the submission of the issue to the Court.” Id. (citation omitted) (internal quotation marks omitted). A motion to reconsider “is not appropriately used to advance arguments or theories that could and should have been made before the district court rendered a judgment.” Cnty. of McHenry v. Ins. Co. of the W., 438 F.3d 813, 819 (7th Cir.2006) (citation omitted) (internal quotation marks omitted).

 

Canadian Pacific requests relief under Rule 60(b), but that rule governs the amendment or alteration of final judgments and orders. Rule 54(b) provides that the court can reconsider an interlocutory order “at any time before the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.” Fed.R.Civ.P. 54(b).

 

Analysis

Canadian Pacific admits that the argument presented in its motion for reconsideration was not previously presented to the court. In response to Siemens’s motion for summary judgment, Canadian Pacific argued (1) that the Carmack Amendment did not apply because the shipment originated outside the United States, and (2) that transformer TP 765 was transported under an exempt contract with a valid limitation of liability as required by the Carmack Amendment. Canadian Pacific’s brief did not reference § 10709, which governs nonexempt transportation that is subject to the jurisdiction of the Surface Transportation Board. Nor did Canadian Pacific cite the two cases it now relies on in its motion. A party’s failure to develop an argument constitutes a waiver of that claim, as “[i]t is not the obligation of this court to research and construct the legal arguments open to parties, especially when they are represented by counsel.” United States v. Hook, 195 F.3d 299, 310 (7th Cir.1999) (quoting Kauthar SDN BHD v. Sternberg, 149 F.3d 659, 668 (7th Cir.1998)). Canadian Pacific has not explained why it did not make this argument on the first go-around, and the court is not inclined to allow Canadian Pacific to make it now. See Cnty. of McHenry, 438 F.3d at 819.

 

Moreover, after reviewing Canadian Pacific’s original summary judgment brief and the relevant legal authorities, the court concludes that it was not manifest error to grant Siemens’s motion for summary judgment. The motion for reconsideration focuses on the court’s attempt to address Canadian Pacific’s assertion, during summary judgment briefing, that “[e]lectrical transporters [such as TP 765] are among the commodities which have been exempted from regulation.” Def.’s Resp. to Pl.’s Mot. for Sum. Jgmt. at 7. In support of this assertion, Canadian Pacific’s brief cited a section of the Surface Transportation Board’s regulations that does not exist. See id. (citing 49 C.F.R. § 1039.1.) The court concluded, after reviewing what appeared to be the correct regulation, that Canadian Pacific was arguing, in part, that the transformer at issue was not subject to the Carmack Amendment because it was “exempt” from regulation. See 49 C.F.R. § 1039.11(a) (listing commodities that are “exempt from the provisions of 49 U.S.C. subtitle IV,” which includes the Carmack Amendment). Accordingly, in footnote 6 of its opinion, the court rejected the argument that the transformer is exempt from the Carmack Amendment on the grounds that the regulation provides that “[e]lectrical machinery, equipment or supplies except … [p]ower … transformers” are exempt. Opinion & Order at 7 n. 6.

 

What footnote 6 fails to take into account is that other courts have indicated that the Carmack Amendment applies only to “exempt” shipments. See, e.g., Regal–Beloit Corp. v. Kawasaki Kisen Kaisha Ltd., 557 F.3d 985, 999–1001 (9th Cir.2009), rev’d on other grounds Kawasaki Kisen Kaisha Ltd. v. Regal–Beloit Corp., ––– U.S. ––––, 130 S.Ct. 2433, 177 L.Ed.2d 424 (2010); Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., 540 F.Supp.2d 486, 494 (S.D.N.Y.2008) (Chin, J.). Under the Interstate Commerce Act’s statutory scheme, “exempt” transportation is still subject to Carmack liability protection because Congress expressly precluded the Surface Transportation Board from exempting carriers from their obligation to provide contractual terms for liability that are consistent with Carmack. See 49 U.S.C. § 10502(e). “[N]onexempt” shipments, on the other hand, are governed by 49 U.S.C. § 10709 and are not subject to the Carmack Amendment. See Regal–Beloit Corp., 557 F.3d at 1000. Thus, if transformer TP 765 is not an exempt commodity under 49 C.F.R. § 1039.11, it is possible that § 10709, rather than the Carmack Amendment, governs the shipping contract.

 

This subtlety is not clear from the text of the regulation relating to exempt commodities or the other sources cited by Canadian Pacific in its summary judgment brief. Moreover, the statute provides “little guidance on how to identify a § 10709 contract,” and “[c]ourts have varied wildly on how [§ 10709] and Carmack work together.” Sompo, 540 F.Supp.2d at 495 (citing cases). The law regarding how to identify a § 10709 contract is evolving. See Babcock & Wilcox Co. v. Kansas S. Ry. Co., 557 F.3d 134, 146 (3d Cir.2009) (“We note the difficulties faced by district courts in the absence of a simple statutory or regulatory test for identifying a § 10709 contract. The few courts that have faced the issue seem to approach it differently.”);   Regal–Beloit, 557 F.3d at 1001 (“The parties’ confusion is understandable, given the muddled state of the law.” (quotations and citation omitted)). The court is aware of no case in this circuit that addresses the issue of how to identify a § 10709 contract. Moreover, Canadian Pacific asserts that the § 10709 contract at issue comprises four separate agreements with Siemens and its intermediaries. Canadian Pacific’s request that the court delve into complicated legal and factual issues relating to whether the contract is governed by § 10709 comes too late.

 

Justice Sotomayor’s dissent in Kawasaki briefly touches on the issue. See 130 S.Ct. at 2462–64 (“I am persuaded by the Government’s view that because the Board’s order in 49 CFR § 1090.2 exempted intermodal rail transportation from all of Part A of the [Interstate Commerce Act], which includes 49 U.S.C. § 10709, Union Pacific could not properly enter into a contract under Section 10709 to relieve it of its obligations under Section 10502(e)” to offer liability claims consistent with the Carmack Amendment. (internal quotations omitted)). Canadian Pacific relied only on the majority opinion in its summary judgment brief and does not now cite the dissent in support of its motion for reconsideration.

 

In addition, the factual record is insufficiently developed to allow the court to conduct even a preliminary assessment of the merits of Canadian Pacific’s position. Canadian Pacific asserts that the court “held that Canadian Pacific and Siemens had a contract for rail transportation for non-exempt traffic.” Def.’s Mot. for Reconsideration ¶ 7. This overstates the significance of footnote 6. That the transformer does not fall under the miscellaneous commodity exemption does not necessarily lead to the conclusion, urged by Canadian Pacific, that TP 765 was “non-exempt traffic.” It is possible that Canadian Pacific’s services fell under some other exemption that was not discussed by the parties. For example, under 49 C.F.R. § 1090.2, container on flatcar rail service is exempt from regulation so long as it is part of “continuous intermodal freight movement.” Because neither party raised the issue, however, the record does not make clear whether this exemption applies. Given Canadian Pacific’s failure to raise the significance of the exemption issue when it had the opportunity, the court is unwilling to draw this inference in Canadian Pacific’s favor. The court will not reconsider its decision to grant Siemens’s motion for partial summary judgment solely because of any confusion that may arise from footnote 6. Canadian Pacific’s motion for reconsideration will be denied.

United States District Court,

E.D. Wisconsin.

NON TYPICAL, INC., and The Hanover Insurance Company, Plaintiffs,

v.

TRANSGLOBAL LOGISTICS GROUP INC., Schneider Logistics International, Inc., Hartford Accident and Indemnity Company, and Hartford Fire Insurance Company, Defendants.

Hanover Insurance Company and Citizens Insurance Company of America, Plaintiffs,

v.

Transglobal Logistics Group Inc., Schneider Logistics International, Inc., Hartford Accident and Indemnity Company, and Hartford Fire Insurance Company, Defendants.

 

Nos. 10–C–1058, 11–C–0156.

May 28, 2012.

 

Chad R. Levanetz, Metzler Timm Treleven SC, Green Bay, WI, for Non Typical, Inc.

 

Kenneth R. Feit, Tell Cheser & Breitbart, Garden City, NY, for The Hanover Insurance Company, Citizens Insurance Company of America.

 

Jonathan T. Smies, Joseph M. Nicks, Godfrey & Kahn SC, Green Bay, WI, for Schneider Logistics International, Inc.

 

Alexander W. Ross, Stephen P. Eisenberg, Leahy Eisenberg & Fraenkel Ltd., Chicago, IL, for Hartford Accident and Indemnity Company, Hartford Fire Insurance Company.

 

ORDER GRANTING MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS

WILLIAM C. GRIESBACH, District Judge.

Before me now is a Motion for Partial Judgment on the Pleadings filed by Schneider Logistics International, Inc. (Schneider) to dismiss the negligence claims asserted by the Plaintiffs in the above-entitled consolidated cases. For the reasons discussed herein, Schneider’s motion will be granted.

 

BACKGROUND

This case concerns a loss resulting from the theft in Illinois of a truckload of digital cameras which was in the process of being transported from China for delivery to the Plaintiff, Non Typical, Inc. (Non Typical), in De Pere, Wisconsin. The cameras were under control of a motor carrier, Transglobal Logistics Group Inc. (Transglobal) at the time of the theft. Schneider’s role, as explained by the Amended Complaints in this action, was limited to assisting Non Typical to arrange for transportation of the cameras. Schneider did not serve as either a carrier or freight forwarder; it served as a “broker.”

 

Schneider’s status in the transaction was discussed in the Court’s decision on Schneider’s Motion to Dismiss. The Court decided that the pleadings did not allege a claim under the Carmack Amendment, 49 U.S.C. § 14706, because Schneider is not alleged to have provided actual transportation of property. (ECF No. 27 at 4.) In this transaction, Schneider was a “broker” because it did not transport the cameras.

 

Non Typical filed its action in this Court in November 2010. Its Complaint alleged several causes of action against Transglobal, but just one (for negligence) against Schneider. (ECF No. 1.) Schneider moved to dismiss the negligence claim because it failed to state a claim upon which relief could be granted. (ECF No. 7.) Instead of contesting the Motion to Dismiss, Non Typical filed an Amended Complaint which alleged additional claims against Schneider, including breach of contract, breach of implied covenant of good faith and fair dealing, and promissory estoppel. (ECF No. 12.) Schneider moved to dismiss all of the causes of action against it in the Amended Complaint. (ECF No. 13.) The Court decided Schneider’s Motion to Dismiss on May 11, 2011. It dismissed Non Typical’s claims against Schneider for breach of the duty of good faith and fair dealing and promissory estoppel, but denied the Motion to Dismiss with respect to the contract and negligence claims. (ECF No. 27.)

 

In the meantime, Non Typical’s insurers, Hanover Insurance Company (Hanover), and Citizens Insurance Company of American (Citizens), filed an action to assert their subrogated interests arising out of payments they made to Non Typical for theft of the cameras in the United States District Court for the Southern District of New York. (ECF No. 1, Case No. 11–CV–00156.) On February 9, 2011, the case was transferred to this Court and later consolidated with the Non Typical case pursuant to Rule 42(a)(2) of the Federal Rules of Civil Procedure. (ECF No. 16.) Schneider then moved to dismiss the claims by Hanover and Citizens for the same reasons it moved to dismiss Non Typical’s claims. (ECF No. 23.)

 

Based on the Court’s decision on Schneider’s Motion to Dismiss Non Typical’s claims, Hanover and Citizens agreed to amend its Complaint to allege only contract and negligence claims against Schneider. In return, Schneider withdrew its Motion to Dismiss. (ECF Nos. 29 and 30.) On July 29, 2011, Hanover and Citizens filed a Second Amended Complaint which added Hartford Accident and Indemnity Company and Hartford Fire Insurance Company (collectively, Hartford) as Defendants. The only claims asserted against Schneider are for breach of contract and negligence. (ECF No. 55.) Non Typical followed shortly thereafter with its own Second Amended Complaint to add Hartford as a Defendant. Consistent with the Court’s decision on Schneider’s Motion to Dismiss, Non Typical’s Second Amended Complaint asserts only breach of contract and negligence claims against Schneider. (ECF No. 58.)

 

LEGAL STANDARD

Rule 12(c) of the Federal Rules of Civil Procedure permits a party to seek judgment on the pleadings after the pleadings have closed. Buchanan–Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir.2009). A motion under Rule 12(c) is reviewed under the same standard employed when reviewing a motion to dismiss under Rule 12(b)(6) for failure to state a claim. Id. (citing Pisciotta v. Old Nat’l. Bancorp, 499 F.3d 629, 633 (7th Cir.2007)). A motion for judgment on the pleadings will not be granted where there are unresolved issues of material fact. Moss v. Martin, 473 F.3d 694, 698 (7th Cir.2007).

 

DISCUSSION

1. Preemption

Schneider first contends the Federal Aviation Administration Authorization Act of 1994 (FAAA) preempts the negligence claims against it. The FAAA includes the following provision for federal preemption of state laws that attempt to regulate transportation by motor carriers:

 

[A] State … may not enact or enforce a law, regulation or other provision having the force and effect of law related to a price, route, or service of any motor carrier … or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

 

49 U.S.C. § 14501(c)(1). One purpose for federal preemption under the regulatory scheme was to eliminate non-uniform state regulation of motor carriers which had caused significant inefficiencies, increased costs, reduced competition, inhibited innovation and technology, and limited the expansion of markets. Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 368, 128 S.Ct. 989, 169 L.Ed.2d 933 (2008). Courts have honored the intent of Congress and have determined that the language “related to” in the FAAA should be interpreted broadly.

 

The Seventh Circuit has interpreted this scheme to mean a state law is preempted if that law expressly references airlines rates, routes, or services or has a significant economic impact upon them. Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1432 (7th Cir.1996). State common law counts as an “other provision having the force and effect of law.” See American Airlines, Inc. v. Wolens, 513 U.S. 219, 233 n. 8, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995); Morales v. Trans World Airlines, Inc., 504 U.S. 374, 388, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992); see also Medtronic, Inc. v. Lohr, 518 U.S. 470, 502–03, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (plurality opinion), id. at 503–05 (Breyer, J., concurring), id. at 509–12 (O’Connor, J., concurring in part and dissenting in part) (characterizing tort remedies as regulatory provisions for purposes of preemption clauses in another statute).

 

While Plaintiffs argue for a narrow reading of preemption in this field, particularly against brokers, courts in this Circuit have broadly interpreted preemption under the ADA and the FAAA. See, e.g., Williams v. Midwest Airlines, Inc., 321 F.Supp.2d 993, 995–96 (E.D.Wis.2004) (holding that a passenger’s tort claims arising out of an airline’s refusal to board him were preempted); see also Travel All Over the World, Inc., 73 F.3d at n. 8 (noting punitive damages are preempted because they represent “an enlargement or enhancement [of the bargain] based on state laws or policies external to the agreement” (citations omitted)). Other district courts outside this Circuit have responded similarly. See, e.g., Yellow Transportation, Inc. v. DM Transportation Management Services, Inc., No. Civ. A. 2:06–CV–1517–LDD, 2006 WL 2871745 (E.D.Pa. July 14, 2006) (holding that claims of misrepresentation, unjust enrichment, quantum meruit, and fraud by an interstate motor carrier against a freight broker were preempted by 49 U.S.C. § 14501(c)(1)); Kashala v. Mobility Servs., Int’l, LLC, No. 07–CV–40107–TSH, 2009 WL 2144289 (D.Mass. May 12, 2009) (dismissing a negligence claim against a transportation broker for loss and damages to personal property because the claims against the broker were preempted by the FAAA); Huntington Operating Corp. v. Sybonney Express, No. H–08–781, 2010 WL 1930087 (S.D.Tex. May 11, 2010) (holding that 49 U.S.C. § 14501 broadly preempted and thus dismissing negligence claims against the broker).

 

Given this precedent and the history of a broad interpretation of federal preemption, I agree with Schneider that the negligence claim is preempted by the FAAA. Relevant precedent indicates tort claims (such as negligence) can be preempted even though state tort law does not directly reference rates, routes, or services. And because the statute expressly lists brokers, I see no reason to treat them differently from traditional carriers. This finding is further consistent with the amount at stake in the case. Non Typical maintains Schneider’s potential liability is in excess of a million dollars. Schneider thus alleges that permitting negligence claims against it in its role as broker would “plainly have an economic effect on the rates it charges and how it provides its transportation brokerage services.” (ECF No. 96 at 7.) See, e.g., S.C. Johnson & Son, 2011 WL 4625655 at(“enforcement of plaintiff’s fraudulent misrepresentation claim would have a prescriptive effect, essentially regulating the practices of defendant carriers (as in Wolens ) or would result in replacement of the parties’ original bargain with something else (as in Mesa Airlines ). In either case, enforcement of plaintiff’s claim would relate to defendant carriers’ prices, routes, or services.”). I thus am convinced that the negligence claims against Schneider are preempted by the FAAA scheme.

 

2. Failure to State a Claim Under Wisconsin Law

Schneider alternatively moves to dismiss the negligence claim on the ground that Plaintiffs have failed to state a claim under Wisconsin law. Both of the Second Amended Complaints allege breach of contract claims against Schneider. Although the precise terms of the contract may be in dispute, it is undisputed that Non Typical and Schneider had an agreement for Schneider to serve as a broker to assist Non Typical in arranging for transportation of the cameras from China to Wisconsin. Non Typical and its insurers have alleged Schneider breached this contract by not exercising reasonable care in selecting Transglobal as one of the carriers for transportation of the cameras and by failing to verify that Transglobal had enough insurance to cover loss of the cameras. They also assert separate causes of action against Schneider for negligence.

 

Wisconsin does not recognize an inherent cause of action for every negligent performance of a contract. A tort action, such as a negligence claim, may only be asserted if there is a duty independent of the performance of the contract. Under this test, the existence of a contract is ignored when determining whether alleged misconduct is actionable in tort. McDonald v. Century 21 Real Estate Corp., 132 Wis.2d 1, 6, 390 N.W.2d 68 (Ct.App.1986); see also Dvorak v. Pluswood Wisconsin, Inc., 121 Wis.2d 218, 220, 358 N.W.2d 544, 545 (Ct.App.1984). If a plaintiff cannot prove the existence of an independent duty, his remedy is limited to suing for breach of contract. Madison Newspapers v. Pinkerton’s Inc., 200 Wis.2d 468, 475, 545 N.W.2d 843 (Ct.App.1996).

 

The Second Amended Complaint contains no claims of negligence founded upon independent duties owed by Schneider. It alleges, in part, that Non Typical notified Schneider that the goods were high-value goods (ECF No. 58 ¶ 45) and that Schneider breached its obligation to inform Transglobal that the high-value cameras were to be properly secured at all times during transport and storage. (Id. ¶ 52, 545 N.W.2d 843.) According to Plaintiffs, this duty is an independent one because it reaches beyond the confines of the contract and focuses on the failed duties of Schneider with respect to communications between the parties and the standard of care in the transportation industry. (ECF No. 93 at 10.) But Schneider would not have had any reason to communicate with either Non Typical or Transglobal if it did not have a contract with Non Typical. Schneider’s obligation to communicate with them in a particular way, if any, was part of its contractual obligation to Non Typical, not part of a duty to Non Typical separate and apart from the contract. Plaintiffs further attempt to argue that the issue is premature, as the precise terms of the contract may be in dispute, but whether or not this is true it has no bearing on whether Schneider had an independent duty giving rise to a tort action. Non Typical’s further argument that Schneider’s motion is precluded by the law of the case is rejected as well. The issue was not clearly presented on the previous motion, and it is clear from the Court’s decision that its treatment of the issue was not intended as final. Schneider’s motion for judgment on the pleadings is thus also granted on this ground.

 

CONCLUSION

In sum, the negligence claims against Schneider are preempted by the FAAA. The negligence claims are alternatively dismissed for failing to state a claim under Wisconsin law. Schneider’s motion for partial judgment on the pleadings (ECF No. 90) is accordingly GRANTED.