United States District Court for the Northern District of Illinois, Eastern Division

June 8, 2022, Decided; June 8, 2022, Filed

No. 21 C 4789

Reporter

2022 U.S. Dist. LEXIS 102270 *

COYOTE LOGISTICS, LLC, Plaintiff, v. ADVANCE TRUCKING SOLUTIONS, INC., a Canadian Corporation, and ONTARIO, INC. d/b/a PEACE TRANSPORTATION, INC., a Canadian Corporation, Defendants.

Core Terms

personal jurisdiction, transport, carrier, cargo, motion to dismiss, pharmaceuticals, forum state, declaration, contacts, Confirmation, allegations, load, destination, shipment

Counsel:  [*1] For Coyote Logistics LLC, on its own behalf and as assignee and subrogee of Galderma Laboratories, LP, Plaintiff: Nicky M Priovolos, Orleans Canty Novy, Chicago, IL; Jason Orleans, Orleans Canty Novy, LLC, Chicago, IL.

For Advance Trucking Solutions Inc., a Canadian Corporation, Defendant: Geoffrey Alexander Belzer, Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, Chicago, IL.

For Ontario, Inc, a Canadian Corporation, doing business asPeace Transportation, Inc., Defendant: Matthew Paul Barrette, Ryan Arthur Mahoney, LEAD ATTORNEYS, Blitch Westley Barrette, S.C., Oak Brook, IL.

Judges: SHEILA FINNEGAN, United States Magistrate Judge.

Opinion by: SHEILA FINNEGAN

Opinion

MEMORANDUM OPINION AND ORDER

Plaintiff Coyote Logistics, LLC has filed suit against Defendants Advance Trucking Solutions, Inc. (“ATS”) and 2137458 Ontario Inc., d/b/a Peace Transportation, incorrectly named as Ontario, Inc. d/b/a Peace Transportation, Inc. (hereinafter “Peace”) seeking to recover damages associated with the loss of a shipment of pharmaceutical products. Plaintiff alleges that ATS is liable for the lost cargo either pursuant to the Carmack Amendment, 49 U.S.C. § 14706 (Count I), or based on a theory of breach of an indemnification agreement (Count II). Plaintiff also seeks [*2]  to hold Peace liable for the loss pursuant to the Carmack Amendment (Count III). ATS answered Counts I and II but Peace has moved to dismiss Count III, arguing that the Court lacks personal jurisdiction over the company under Federal Rule of Civil Procedure 12(b)(2) and that Plaintiff cannot state a Carmack Amendment claim against it under Rule 12(b)(6). The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons stated here, the motion to dismiss for lack of personal jurisdiction is granted, and the motion to dismiss for failure to state a claim is denied as moot.

BACKGROUND¹

This lawsuit arises from a contract to ship pharmaceuticals from Canada to the United States. Plaintiff, a freight transportation broker with its principal place of business in Chicago, Illinois, arranged for ATS, a Canadian corporation with its principal place of business in Mississauga, Ontario, to transport a load of pharmaceuticals from Baie-D’Urfe, Quebec to Galderma Laboratories, LP (“Galderma”) in Fort Worth, Texas. (Doc. 1 ¶¶ 2, 3, 6). On or about February 28, 2019, Plaintiff tendered the load to ATS in good order and condition, along with a Bill of Lading showing the value of the cargo as $1,693,649.04 and confirming the shipment was to go from Quebec [*3]  to Texas. (Id. ¶¶ 6, 7, 11; Doc. 1-3). Without authorization or consent from Plaintiff, ATS gave the load to Peace and it was subsequently stolen in transit. (Doc. 1 ¶¶ 8, 9). Plaintiff paid Galderma’s insurance carrier “Zurich” $100,000 in exchange for “the assignment of all of its rights, title, and interest in the shipment and claim for prosecution and collection of the cargo loss.” (Id. ¶ 12). On September 9, 2021, Plaintiff filed suit to recover the $100,000 loss from ATS and/or Peace.

DISCUSSION

I. Motion to Dismiss Under 12(b)(2)

Peace first argues that all of the allegations against it must be dismissed pursuant to Rule 12(b)(2) for lack of personal jurisdiction.

A. Standard of Review

A complaint need not set forth facts alleging personal jurisdiction, but “[o]nce [the] defendant moves to dismiss under Federal Rule of Civil Procedure 12(b)(2), the plaintiff has the burden of establishing personal jurisdiction.” Rogers v. City of Hobart, Ind., 996 F.3d 812, 818 (7th Cir. 2021). At this stage of the proceedings, all of Plaintiff’s factual allegations are deemed true. Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010). However, “if the defendant provides an affidavit in support of lack of jurisdiction, ‘the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction.'” Colucci v. Whole Foods Market Servs., Inc., No. 19 C 8379, 2021 U.S. Dist. LEXIS 64063, 2021 WL 1222804, at *2 (N.D. Ill. Apr. 1, 2021) (quoting Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 783 (7th Cir. 2003)).

In evaluating the parties’ [*4]  arguments, “this court will accept as true any facts in the defendants’ affidavits that do not conflict with anything in the record, either by way of [the plaintiff’s] complaint or other submissions.” Curry v. Revolution Labs., LLC, 949 F.3d 385, 392-93 (7th Cir. 2020). Factual conflicts between the record and the defendants’ affidavits will be resolved in the plaintiff’s favor. Id. Where, as here, no material facts are in dispute and an evidentiary hearing is unnecessary, the plaintiff “bears only the burden of making a prima facie case for personal jurisdiction.” Id. (quoting uBID, Inc. v. GoDaddy Group, Inc., 623 F.3d 421, 423 (7th Cir. 2010)). See also Purdue Research Found., 338 F.3d at 782.

B. Analysis

“In a federal question case such as this one, a federal court has personal jurisdiction over the defendant if either federal law or the law of the state in which the court sits authorizes service of process to that defendant.” Expeditee LLC v. Entities Listed on Exhibit 1, No. 21 C 6440, 2022 U.S. Dist. LEXIS 88506, 2022 WL 1556381, at *3 (N.D. Ill. May 17, 2022) (quoting Mobile Anesthesiologists Chi., LLC v. Anesthesia Assocs. of Houston Metroplex, P.A., 623 F.3d 440, 443 (7th Cir. 2010)). Plaintiff argues that this Court has personal jurisdiction over Peace pursuant to § 14706(d)(1) of the Carmack Amendment. (Doc. 20, at 4). Under that section, a “civil action . . . may be brought against a delivering carrier . . . in a judicial district . . . through which the defendant carrier operates.” 49 U.S.C. § 14706(d)(1). The cited provision, however, concerns venue and does not suffice to give this Court personal jurisdiction over Peace. Allied Van Lines, Inc. v. Beaman, No. 07 C 2407, 2008 U.S. Dist. LEXIS 60250, 2008 WL 4866052, at *1-2 (N.D. Ill. July 21, 2008) (the Carmack Amendment‘s “specific venue [*5]  provisions are not a substitute for personal jurisdiction.”); Thompson Tractor Co. v. Daily Express Inc., No. 2:20-CV-02210, 2020 U.S. Dist. LEXIS 191664, 2020 WL 6121158, at *2 (C.D. Ill. Oct. 16, 2020) (“[T]he Carmack Amendment does not itself authorize service of process” and does not confer personal jurisdiction). See also 673753 Ontario Ltd. v. HDZ Logistics, LLC, No. 6:19-CV-506, 2020 U.S. Dist. LEXIS 255973, 2020 WL 10054403, at *3 (M.D. Fla. Apr. 15, 2020) (“[C]ourts that have considered the issue have concluded that § 14706(d) does not permit them to exercise personal jurisdiction over the defendant carrier.”) (collecting cases).

In the absence of a federal law providing for personal jurisdiction, the Court must look to Illinois’s long-arm statute. Expeditee, 2022 U.S. Dist. LEXIS 88506, 2022 WL 1556381, at *3. The Illinois long-arm statute “permits the exercise of personal jurisdiction if it would be allowed under either the United States Constitution or the Illinois Constitution.” Landa v. DPK Communities, LLC, No. 21 C 1529, 2022 U.S. Dist. LEXIS 4305, 2022 WL 93502, at *2 (N.D. Ill. Jan. 10, 2022) (citing 735 ILCS 5/2-209(c)). See also Curry, 949 F.3d at 393. Since “there is no operative difference between these two constitutional limits,” the Court considers whether exercise of personal jurisdiction over Peace would violate federal due process. Id. (quoting Mobile Anesthesiologists, 623 F.3d at 443). See also Curry, 949 F.3d at 393 (“[T]he Illinois long-arm statute permits the exercise of jurisdiction to the full extent permitted by the Fourteenth Amendment’s Due Process Clause.”).

The Due Process clause “authorizes personal jurisdiction over out-of-state defendants when the defendant has ‘certain minimum contacts with [the state] such that the maintenance of the suit does not offend traditional notions of fair [*6]  play and substantial justice.'” Kipp v. Ski Enter. Corp. of Wis., Inc., 783 F.3d 695, 697 (7th Cir. 2015) (quoting Int’l Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)). “[I]t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Beaulieu v. Ashford Univ., 529 F. Supp. 3d 834, 846 (N.D. Ill. 2021). “Personal jurisdiction does not exist where the defendant’s contacts with the forum state are merely “random, fortuitous, or attenuated.” Sun Chenyan v. Partnerships and Unincorporated Ass’ns Identified on Schedule “A”, No. 20 C 221, 2021 U.S. Dist. LEXIS 86934, 2021 WL 1812888, at *2 (N.D. Ill. May 6, 2021) (quoting Walden v. Fiore, 571 U.S. 277, 286, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014)).

Personal jurisdiction may be general or specific. General personal jurisdiction exists only “when the [party’s] affiliations with the State in which suit is brought are so constant and pervasive as to render it essentially at home in the forum State.” Beaulieu, 529 F. Supp. 3d at 846 (quoting Daimler AG v. Bauman, 571 U.S. 117, 121, 134 S. Ct. 746, 187 L. Ed. 2d 624 (2014)). Specific personal jurisdiction exists when “the defendant’s contacts with the forum state [are] ‘directly related to the conduct pertaining to the claims asserted.'” Sun Chenyan, 2021 U.S. Dist. LEXIS 86934, 2021 WL 1812888, at *3 (quoting Brook v. McCormley, 873 F.3d 549, 552 (7th Cir. 2017)).

Plaintiff does not distinguish between general and specific personal jurisdiction in responding to Peace’s motion. The Court does its best to evaluate Plaintiff’s arguments within the context of each category.

1. General Personal Jurisdiction

“A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations [*7]  to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558, 198 L. Ed. 2d 36 (2017) (quoting Daimler, 571 U.S. at 127). The “‘paradigm’ forums in which a corporate defendant is ‘at home’ . . . are the corporation’s place of incorporation and its principal place of business.” Al Haj v. Pfizer Inc., 338 F. Supp. 3d 741, 749 (N.D. Ill. 2018). General personal jurisdiction may also exist in an “exceptional case” where “a corporate defendant’s operations in another forum [are] ‘so substantial and of such a nature as to render the corporation at home in that State.'” BNSF Ry., 137 S. Ct. at 1558. This requires “more than the ‘substantial, continuous, and systematic course of business’ that was once thought to suffice.” Kipp, 783 F.3d at 698 (quoting Daimler, 134 S. Ct. at 760-61). Rather, a corporation must have continuous operations in the state that “justify suit . . . on causes of action arising from dealings entirely distinct from those activities.” Id. (emphasis in original).

Peace has submitted a signed declaration from its Safety Coordinator Deep Shikha stating that Peace is an Ontario corporation with its principal place of business in Brampton, Ontario. (Doc. 12-1, Shikha Decl., ¶¶ 6, 7). Plaintiff does not dispute the accuracy of this declaration so the [*8]  question is whether Peace has continuous operations in Illinois that are sufficient to make this the exceptional case where Peace is “at home” in the State. McClellan v. CSX Transp., Inc., No. 18 C 4183, 2018 U.S. Dist. LEXIS 201639, 2018 WL 6192192, at *2 (N.D. Ill. Nov. 28, 2018). Peace does not have such operations. To begin, the Complaint itself provides only the barest allegations that Peace provides “transportation services in interstate commerce throughout the United States,” and that “[u]pon information and belief” ATS hired Peace to transport the pharmaceutical cargo to Fort Worth, Texas. (Doc. 1 ¶¶ 3, 8, 29). Nothing in the Complaint connects Peace to Illinois.

Moreover, the declaration from Shikha states that Peace does not have an office in Illinois, does not own any property in Illinois, and does not have any employees in Illinois. (Doc. 12-1, Shikha Decl., ¶ 20). Shikha further attests that in 2018 and 2019, only 1.26% of Peace’s transports throughout Canada and the United States originated in or were destined for locations in Illinois. (Id. ¶ 19). Plaintiff does not provide a contrary declaration or cite any authority suggesting that this minimal amount of contact with Illinois suffices to demonstrate that Peace is “at home” in the State. See, e.g., Moore v. Alaska Airlines, Inc., No. 19 C 2951, 2019 U.S. Dist. LEXIS 191622, 2019 WL 5895434, at *3 (N.D. Ill. Nov. 12, 2019) (defendant airline was not “at home” in [*9]  Illinois where more than 97% of its revenue was generated outside of Illinois, more than 99% of its employees worked outside of Illinois, and more than 97% of its advertising occurred outside Illinois); BNSF, 137 S. Ct. at 1559 (the fact that the defendant had “over 2,000 miles of railroad track and more than 2,000 employees in Montana . . . does not suffice to permit the assertion of general jurisdiction.”). On the record presented, Plaintiff has failed to make a prima facie showing of general personal jurisdiction over Peace.

2. Specific Personal Jurisdiction

The Court next considers whether Peace is subject to specific personal jurisdiction in Illinois. There are three “essential requirements” for specific personal jurisdiction over an out-of-state defendant: “(1) the defendant must have purposefully availed himself of the privilege of conducting business in the forum state or purposefully directed his activities at the state; (2) the alleged injury must have arisen from the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with traditional notions of fair play and substantial justice.” Switchboard Apparatus, Inc. v. Wolfram, No. 21 C 1665, 2022 U.S. Dist. LEXIS 90353, 2022 WL 1591732, at *4 (N.D. Ill. May 19, 2022) (quoting Felland v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012)). “The inquiry must focus on ‘the relationship among the defendant, the [*10]  forum, and the litigation.'” Brook, 873 F.3d at 552 (quoting Walden, 134 S. Ct. at 1122).

Plaintiff argues that specific personal jurisdiction is proper solely because Peace has transported shipments to and from Illinois in the past. Citing Shikha’s declaration, Plaintiff stresses that in 2018 and 2019 Peace transported approximately 17,479 loads “throughout Canada and the United States,” of which approximately 220 (or 1.26%) either originated in or were destined for Illinois. (Doc. 20, at 4) (citing Doc. 12-1, Shikha Decl., ¶ 19). In Plaintiff’s view, since Peace availed itself of the benefit of doing business in Illinois it reasonably should have anticipated being haled into court there. (Doc. 20, at 5). This Court disagrees.

It is well-settled that for specific jurisdiction, a defendant’s contacts in the forum state must “demonstrate a real relationship with the state with respect to the transaction at issue.” Northern Grain Marketing, LLC v. Greving, 743 F.3d 487, 493 (7th Cir. 2014). In other words, Peace’s “Illinois contacts must have caused or relate to [Plaintiff’s] injury.” Kosar v. Columbia Sussex Mgmt., LLC, No. 20 C 1736, 2021 U.S. Dist. LEXIS 221913, 2021 WL 5356753, at *6 (N.D. Ill. Nov. 16, 2021) (citing Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1026, 209 L. Ed. 2d 225 (2021)). As noted, the Complaint alleges that: Plaintiff tendered pharmaceuticals to ATS in Quebec for transportation to Texas; upon information and belief ATS then tendered the load to Peace for transportation from Quebec [*11]  to Texas; the cargo was stolen in transit; and Plaintiff suffered monetary damages stemming from the lost cargo. (Doc. 1 ¶¶ 6, 8, 9, 12, 28-31; Doc. 1-3). There are no allegations that the load was bound for Illinois or that it was ever in the State. Cf. Schwarz v. Nat’l Van Lines, Inc., 317 F. Supp. 2d 829, 835 (N.D. Ill. 2004) (Arizona court had specific jurisdiction over defendant carrier that “agreed to transport Schwarz’s belongings out of the forum” and “entered the state to pick up Schwarz’s belongings.”). Moreover, Peace has presented unrefuted evidence that ATS hired Peace to transport the pharmaceuticals from Quebec to ATS’s yard in Mississauga, Ontario, and not to any destination in the United States. (Doc. 12-1, Shikha Decl., ¶¶ 8, 9; Doc. 12-1, Carrier Confirmation dated 2/28/2019, at 5).

It appears that Peace arranged for another Canadian carrier, DJSS Transport (“DJSS”), to perform the actual transportation of the pharmaceuticals from Quebec to Ontario. (Id., Shikha Decl., ¶¶ 11, 13). The Carrier Confirmation memorializing that arrangement makes no mention of Plaintiff, Illinois, or any other destination within the United States, and Shikha attests in his declaration that “[t]here was never any direction to, or agreement on the part of, Peace [*12]  or DJSS to transport the cargo outside of Canada.” (Id. ¶¶ 13, 14; Doc. 12-1, Carrier Confirmation dated 2/28/2019, at 6). According to Shikha, someone claiming to be from DJSS picked up the cargo on February 28, 2019 and “apparently stole it.” (Doc. 12-1, Shikha Decl., ¶ 15).

The only arguable connection that exists between Peace, the lost pharmaceuticals and Illinois is Plaintiff, the Chicago-based company that arranged for ATS to transport the cargo from Canada to Texas. But “[a] plaintiff’s presence in the forum state is insufficient to satisfy the ‘defendant-focused minimum contacts inquiry.'” Kosar, 2021 U.S. Dist. LEXIS 221913, 2021 WL 5356753, at *6 (quoting Walden, 571 U.S. at 284). This is especially true here where Peace had no knowledge of Plaintiff’s involvement in the shipping transaction. Shikha attests in his declaration that Peace has never had a contract with Plaintiff, dealt exclusively with ATS regarding the pharmaceutical cargo at issue here, and was unaware that Plaintiff served as a broker for the shipment until after the cargo disappeared. (Doc. 1-2, Shikha Decl., ¶¶ 16, 17). Shikha’s assertion finds support in the Carrier Confirmation between ATS and Peace, which makes no mention of Plaintiff, Illinois, or any other destination within the [*13]  United States. (Doc. 12-1, Carrier Confirmation dated 2/28/2019, at 5). The Court recognizes that Plaintiff and ATS entered into a Broker-Carrier Agreement stating that all legal actions between those two entities must be brought and maintained in Illinois, but Peace is not a signatory to that agreement and is not bound by its forum selection clause. (Doc. 1 ¶ 5; Doc. 1-2).

Given the undisputed evidence that Peace’s suit-related contacts with Illinois are non-existent, combined with the fact that Peace does not have an office, own property, or have any employees in Illinois, the Court finds that exercising jurisdiction over Peace would offend traditional notions of fair play and substantial justice. Peace would face a significant burden in defending this lawsuit in Illinois, and dismissing Peace will not leave Plaintiff without a remedy — ATS remains a named defendant “from which Plaintiff could potentially recover in full.” Alipourian-Frascogna v. Etihad Airways, No. 21 C 0001, 2022 U.S. Dist. LEXIS 50836, 2022 WL 847559, at *7 (N.D. Ill. Mar. 22, 2022). Plaintiff does not present any meaningful argument to the contrary and has not met its burden of establishing a prima facie showing of specific jurisdiction over Peace.

3. Summary

Peace’s motion to dismiss for lack of personal jurisdiction is granted. Peace is not [*14]  “at home” in Illinois for purposes of general jurisdiction, and Plaintiff’s alleged injury did not arise out of Peace’s forum-related activities as required for specific jurisdiction.

II. Motion to Dismiss Under 12(b)(6)

Having concluded that this Court lacks personal jurisdiction over Peace, Peace’s motion to dismiss for failure to state a claim is denied as moot.

CONCLUSION

For the reasons set forth above, Defendant Peace Transportation’s Motion to Dismiss [12] is granted in part and denied as moot in part.

ENTER:

/s/ Sheila Finnegan

SHEILA FINNEGAN

United States Magistrate Judge

Dated: June 8, 2022

End of Document

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¹ The Court “construe[s] the complaint in the ‘light most favorable to the nonmoving party, accept[s] well-pleaded facts as true, and draw[s] all inferences in [the nonmoving party’s] favor.'” Zahn v. North Am. Power & Gas, LLC, 847 F.3d 875, 877 (7th Cir. 2017) (quoting Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir. 2016)).

United States District Court for the Northern District of Illinois, Eastern Division

June 8, 2022, Decided; June 8, 2022, Filed

Case No. 21-cv-6154

Reporter

2022 U.S. Dist. LEXIS 102271 *

COYOTE LOGISTICS, LLC, Plaintiff, v. BAJAN ENTERPRISE, INC., Defendant.

Core Terms

carriers, own negligence, indemnify, cheese, shippers, promisee, indemnification, losses, motor carrier, indemnity provision, transportation, unenforceable, motion to dismiss, broker, prohibits, includes, covers, contractual, misconduct, fault

Counsel:  [*1] For Coyote Logistics LLC, Plaintiff: Jason Orleans, LEAD ATTORNEY, Orleans Canty Novy, LLC, Chicago, IL; Nicky M Priovolos, Orleans Canty Novy, Chicago, IL.

For Bajan Enterprise, Inc., a Florida Corporation, Defendant: David Joseph Farina, LEAD ATTORNEY, Cray Huber Horstman Heil & VanAusdal LLC, Chicago, IL.

Judges: Hon. Steven C. Seeger, United States District Judge.

Opinion by: Steven C. Seeger

Opinion

MEMORANDUM OPINION AND ORDER

This case is about lost cheese. A supermarket chain needed to ship cheese across state lines, from Tennessee to Florida. Coyote Logistics LLC, a freight broker, coordinated the transportation and entrusted the cheese to Bajan Enterprise, Inc., a carrier.

The cheese never got there. Unfortunately, Bajan’s tractor trailer got in an accident, and the cheese was a casualty. The cargo was a complete loss. The supermarket never received the cheese, so it deducted the price of the cheese from its payables to Coyote.

Coyote, in turn, didn’t want to foot the bill for the demise of the dairy shipment. So it brought this action against Bajan, seeking to hold Bajan liable for its failure to deliver the product. Coyote brought a federal claim under the Carmack Amendment, and a state law claim for breach of contract based [*2]  on an indemnification provision.

Bajan moved to dismiss the second count, arguing that the indemnification provision is unenforceable under an Illinois statute. For the reasons stated below, the motion to dismiss is denied.

Background

At the motion to dismiss stage, the Court must accept as true the well-pleaded allegations of the complaint. See Lett v. City of Chicago, 946 F.3d 398, 399 (7th Cir. 2020). The Court “offer[s] no opinion on the ultimate merits because further development of the record may cast the facts in a light different from the complaint.” Savory v. Cannon, 947 F.3d 409, 412 (7th Cir. 2020).

Plaintiff Coyote Logistics, LLC is a freight broker. See Cplt., at ¶¶ 1, 5 (Dckt. No. 1). It arranges the transportation of freight by motor carriers in interstate and foreign commerce. Id. at ¶ 1. It is authorized to act as a broker by the Federal Motor Carrier Safety Administration. Id.

On September 13, 2019, Coyote tendered a load of cheese to Defendant Bajan Enterprise, Inc. Id. at ¶ 5. Coyote gave custody of the cheese to Bajan in Tennessee. Id. Bajan’s job was to haul the cheese to Florida. Id.

The complaint doesn’t reveal anything about the cheese, except that there was a lot of it. The cheese filled a tractor trailer. And it came with a big price tag, too. The cheese apparently was [*3]  worth tens of thousands of dollars. Id. at ¶ 8. That’s a lot of cheese.

The cheese was in good shape when it left Tennessee. Id. at ¶ 6. But during transit, Bajan’s tractor trailer was involved in an accident. Id. at ¶ 7. The complaint doesn’t explain what happened or who was at fault. The cheese was deemed a loss. Id.

It was not cheap cheese. Publix Super Market, Inc. – the owner of the cheese — issued a damage claim for $88,660.56. Id. at ¶ 8. Publix deducted that amount from Coyote’s payables as payment for the loss. Id. at ¶ 9.

Coyote, in turn, sued Bajan to recoup its losses. It brings two claims. First, Coyote claims that Bajan is liable for the loss of cheese under the so-called Carmack Amendment, 49 U.S.C. § 14706, a federal statute that allocates responsibility for losses in interstate shipping. Id. at ¶¶ 10-16. Second, in the alternative, Coyote brings a state law breach-of-contract claim. Coyote alleges that Bajan has breached its duty to indemnify under their Broker-Carrier Agreement. Id. at ¶¶ 17-22; see also Broker-Carrier Agreement (Dckt. No. 1-1).

Bajan moves to dismiss Count II, meaning the claim about the contractual duty to indemnify. See Def.’s Partial Mtn. to Dismiss (Dckt. No. 9). The gist of the [*4]  argument is that the indemnification provision is unenforceable under Illinois law.

Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not the merits of the case. See Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a motion to dismiss, the Court must accept as true all well-pleaded facts in the complaint and draw all reasonable inferences in the plaintiff’s favor. See AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive, the complaint must give the defendant fair notice of the basis for the claim, and it must be facially plausible. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

When reviewing a motion to dismiss under Rule 12(b)(6), the court may consider “the complaint itself, documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice.” Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). The complaint includes a breach of contract claim, so the contract itself is fair game.

Analysis

The dispute is about whether Coyote can pass along the costs of the failed delivery. Coyote seeks indemnification from Bajan for the loss of [*5]  the cheese. And Bajan responds that the indemnification provision is unenforceable under Illinois law. See Def.’s Partial Mtn. to Dismiss (Dckt. No. 9); Def.’s Mem., at 1 (Dckt. No. 10). The parties agreed that Illinois law applies, and no one disputes it. See Broker-Carrier Agreement, at § 11.N (Dckt. No. 1-1, at 7 of 16).

Illinois law prohibits certain types of indemnification provisions in motor carrier transportation contracts. See K. Miller Constr. Co. v. McGinnis, 238 Ill. 2d 284, 345 Ill. Dec. 32, 938 N.E.2d 471, 480 (2010); see also Ruan Transp. Corp. v. Sentry Ins., 2018 U.S. Dist. LEXIS 137812, 2018 WL 3869971, at *3-4 (N.D. Ill. 2018); Burke v. John Maneely Co., 2016 U.S. Dist. LEXIS 14053, 2016 WL 454330, at *2-3 (N.D. Ill. 2016); Northland Ins. Co. v. Barnhart Crane & Rigging Co., 2013 U.S. Dist. LEXIS 181045, 2013 WL 6859279, at *8 (N.D. Ill. 2013). Illinois law does not prohibit indemnification provisions generally. But it does prohibit indemnification when the first party wants to saddle the second party with the costs of the first party’s own negligence and intentional misconduct. Specifically:

Notwithstanding any other provision of law, a provision, clause, covenant, or agreement contained in, collateral to, or affecting a motor carrier transportation contract that purports to indemnify, defend or hold harmless, or has the effect of indemnifying, defending or holding harmless, the promisee from or against any liability for loss or damage resulting from the negligence or intentional acts or omissions of the promisee is against the public policy of this State and is void and unenforceable. [*6] 

See 625 ILCS 5/18c-4105(a) (emphasis added).

Simply put, an “agreement” to “indemnify” a party to a “motor carrier transportation contract” for “negligence or intentional acts or omissions” of the promisee is unenforceable. Id. A promisee cannot receive indemnification for the promisee’s own negligence or bad acts.

Notice what the statute does, and what it doesn’t do. The statute prohibits the promisee from recovering losses caused by the promisee’s own negligence or intentional misconduct. But it doesn’t prohibit indemnification agreements generally. If a party has a right to indemnification for some other reason, that contractual arrangement is fair game.

The phrase “motor carrier transportation contract” sweeps broadly. It covers a contract for (1) the transportation of property for compensation or hire by the motor carrier; (2) the entry on property to load, unload, or transport property; or (3) a service incidental to those activities, such as storage of property. See 625 ILCS 5/18c-4105(b)(1). So, just about any contract for hire involving moving, loading, unloading, and storing property counts.

There isn’t a lot of case law about this particular statute. Only a few cases are out there, and they often acknowledge how it protects [*7]  carriers from the negligence of shippers. “The purpose of such statutes ‘is to rectify what many states . . . have perceived to be an inequitable “shift of risk” in the shipper and carrier relationship in motor carrier transportation contracts when a carrier is contractually required to indemnify a shipper for the shipper’s own negligence.'” See Burke, 2016 U.S. Dist. LEXIS 14053, 2016 WL 454330, at *3 (quoting Ruiz v. Carmeuse Lime, Inc., 2011 U.S. Dist. LEXIS 86693, 2011 WL 3439221, at *5 (N.D. Ind. 2011)). So the purpose is protecting carriers from paying for the shippers’ negligence.

Reading the entire provision in isolation, and taking it at face value, one might think that carriers and shippers were on equal footing. That is, one might conclude that the statute protects both carriers and shippers. The statute reads like it prohibits carriers from indemnifying shippers for the shippers’ own negligence, and prohibits shippers from indemnifying carriers for the carriers’ own negligence. After all, the statute uses the all-inclusive word “promisee.”

But a dive into the definitions shows that the statute did not pave a two-way street. The statute defines “promisee” to mean “the promisee and any agents, employees, servants, or independent contractors who are directly responsible to the promisee except for motor carriers party to a motor [*8]  carrier transportation contract with promisee, and such motor carrier’s agents, employees, servants or independent contractors directly responsible to the motor carrier.” See 625 ILCS 5/18c-4105(b)(2) (emphasis added).

The phrase “except for motor carriers” means that carriers don’t fall within the definition of “promisee.” Id. Carriers aren’t promisees, so there is no statutory ban on contractual provisions that require shippers to indemnify carriers for the carriers’ own negligence. On the flipside, shippers are promisees, so a contractual provision that requires a carrier [i.e., a promisor] to indemnify a shipper [i.e., a promisee] for losses from the shipper’s [i.e., promisee’s] own negligence is void. The upshot is that the statute protects carriers from contracts that require carriers to pay for the negligence of shippers, but does not protect shippers from contracts that require shippers to pay for the negligence of carriers.¹

The Broker-Carrier Agreement at issue here includes language that fits within the statute. The agreement includes an indemnification clause that requires Bajan (the carrier, meaning [*9]  the company hauling the cheese) to indemnify Coyote (the broker) for losses. “CARRIER [i.e., Bajan] agrees to be responsible for, and to defend, indemnify and hold BROKER [i.e., Coyote] . . . harmless of and from any and all claims, liabilities, demands, actions and causes of action, suits at law and proceedings in equity . . . which may arise from or in connection with the operations performed or to be performed pursuant to this Agreement, without regard to fault or negligence on the part of CARRIER . . . .” See Broker-Carrier Agreement, at § 10 (Dckt. No. 1-1, at 6 of 16).

The provision is sweeping, covering claims “of any nature” and “howsoever arising,” including “all losses, damages (including, but not limited to: consequential, speculative, direct, indirect and punitive damages), personal injury, death and/or loss or damage to cargo or other property, and/or claim for any such loss or occurrence.” Id. Bajan has to indemnify Coyote “without regard to fault or negligence on the part of” Bajan. Id.

That general provision is the starting point, creating a duty to indemnify as the baseline. But a later provision ratchets it back. Bajan has no duty to indemnify when Coyote — and Coyote [*10]  alone — was negligent. “The indemnifications . . . shall NOT have application in instances when the claim, demand, liability, or expense results directly from the sole negligence of BROKER [i.e., Coyote].” Id. (all caps in original). So when Coyote is 100% at fault, Bajan is off the hook.

The Broker-Carrier Agreement thus includes a sweeping indemnification provision, and it covers just about anything and everything. Bajan has a duty to indemnify, and that duty covers “all losses, damages . . . and/or loss or damage to cargo or other property.” Id. And it doesn’t matter if Bajan was blameless, because the duty applies “without regard to fault or negligence on the part of CARRIER [i.e., Bajan] . . . .” Id. The only exception is if the losses stem from the “sole negligence of BROKER [i.e., Coyote].” Id.

For present purposes, the most important thing is that the agreement requires Bajan to indemnify Coyote for losses caused by negligence, unless Coyote is 100% responsible because of its own negligence. And that’s where the agreement goes off the rails and runs into trouble. Again, under Illinois law, a motor carrier transportation contract cannot require the carrier to indemnify the shipper [*11]  for the shipper’s own negligence. And that’s what this contract does: it requires Bajan to indemnify Coyote for Coyote’s own negligence (again, unless Coyote is 100% to blame).

The contract, at least in part, runs afoul of the Illinois anti-indemnification statute. It requires Bajan to indemnify Coyote for losses, even if the losses stem primarily from Coyote’s own negligence and misconduct. To that extent, the provision runs headlong into the text of the statute.

Even so, that’s not exactly the situation here. Coyote isn’t trying to recover losses from Bajan for Coyote’s own negligence. Or, at the very least, there’s no suggestion of that in the complaint, which is all that matters. It is not as if Coyote was negligent, and wants Bajan to pay for Coyote’s own negligence.

And, the provision does more than require Bajan to indemnify Coyote for Coyote’s own negligence and bad acts. It basically requires indemnification for just about anything. So it covers Coyote’s own negligence. But it covers lots of other situations, too.

Putting it all together, the contract includes a sweeping indemnification provision, and part of that provision runs afoul of Illinois law. The contract requires Bajan [*12]  to indemnify Coyote for Coyote’s own negligence, but Illinois law prohibits such an agreement. But by all appearances, Coyote is not invoking that provision to recoup something that it cannot recover under Illinois law. Coyote cannot receive indemnification for Coyote’s own negligence, but it seems that Coyote isn’t trying to do that anyway.

The question, then, is what to do about the fact that the provision, at least in part, runs afoul of Illinois law. Does the rest of the indemnification provision survive? From a textual perspective, does the baby get thrown out with the bathwater? Or does the indemnification provision otherwise remain intact, except to the extent that it violates Illinois law?

Another provision of the contract provides the answer. The Broker-Carrier Agreement includes a severability provision, and it confirms that unenforceable text can be thrown overboard without sinking the rest of the terms. “In the event any of the terms of this Agreement are determined to be invalid or unenforceable, no other terms shall be affected and the unaffected terms shall remain valid and enforceable as written.” See Broker-Carrier Agreement, at § 11.J (Dckt. No. 1-1, at 6 of 16).

Illinois [*13]  courts enforce such severability provisions. See, e.g., 1030 W. N. Ave. Bldg., LLC v. The Firm, LLC, 2022 IL App (1st) 200588-U, at ¶ 34 (2022) (“Here, both the mortgage and separate assignment had severability clauses, which ‘certainly strengthens the case for the severance of the unenforceable provisions because [they] indicate that the parties intended for the lawful portions of the contract to be enforced in the absence of the unlawful portions.'”) (quoting Abbott-Interfast Corp. v. Harkabus, 250 Ill. App. 3d 13, 189 Ill. Dec. 288, 619 N.E.2d 1337, 1343 (1993)); First Peek Ultrasound L.L.C. v. Weideman, 2018 IL App (1st) 180858-U, at ¶ 48 (2018) (“[T]he presence of a severability clause in a contract strengthens the case for the severance of unenforceable provisions because it indicates that the parties intended for the lawful portions of the contract to be enforced in the absence of the unlawful portions.”). Parties can agree ex ante to lop off what doesn’t pass muster, and keep the rest.

Taking a step back, and viewing everything as a whole, the breach of contract claim lives to fight another day. Coyote wants indemnification from Bajan for the costs of the failed delivery of the cheese. Under the agreement, Coyote is entitled to indemnification, unless Coyote is seeking indemnification for Coyote’s own negligence. That arrangement would violate Illinois law. See Burke, 2016 U.S. Dist. LEXIS 14053, 2016 WL 454330, at *3 (noting that the indemnification agreement was “void and unenforceable” only “to the [*14]  extent” that it allowed the shipper to evade liability for its own negligence). But that doesn’t seem to be the situation here. In the end, the indemnification provision might be too broad — meaning that it entitles Coyote to something that Illinois law prohibits — but that overbreadth does not doom the entire provision, thanks to the severability provision.

For now, the breach of contract claim survives. This Court has no reason to think that Coyote is attempting to recover losses caused by Coyote’s own negligence or intentional misconduct. If that’s right, then the claim can go forward. Illinois law does not prohibit indemnification for other losses, meaning losses for something other than the promisee’s own foul-ups. If Coyote is, in fact, attempting to get indemnification for Coyote’s own negligence or bad acts, then Bajan can raise that argument again at a later time. In the meantime, the claim can roll forward.

Conclusion

For the foregoing reasons, the motion to dismiss is denied.

Date: June 8, 2022

/s/ Steven C. Seeger

Steven C. Seeger

United States District Judge

End of Document

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¹ Apparently, most states have adopted anti-indemnification statutes covering the transportation industry. Some statutes are a two-way street, and some statutes are a one-way street. That is, some statutes protect carriers from contracts that require carriers to pay for shippers’ negligence and protect shippers from contracts that require shippers to pay for carriers’ negligence. That’s a two-way street. But some statutes protect only carriers from contracts that require carriers to pay for shippers’ negligence, and do not offer comparable protection in the other direction. That’s a one-way street. Iowa is a good example of a state with a two-way street, and North Dakota is a good example of a state with a one-way street (like Illinois). Compare ICA § 325B.1, with NDCC § 22-02-10; see also Gregory D. Podolak, Contractual Indemnity: Anti-Indemnity Statutes and Additional Insured Coverage, Saxe, Doernberger & Vita, P.C. (August 27, 2018), https://www.sdvlaw.com/insights/contractual-indemnity-anti-indemnity-statutes-and-additional-insured-coverage (“On a basic level, the transportation anti-indemnity laws function the same as the construction anti-indemnity laws: they impose limitations on the [liabilities] assumed by the contracting parties. The rationale behind these laws in this industry is identical to that in construction: there was a need to protect downstream parties, like truckers and other motor carriers with little to no bargaining power, from absorbing most of the risk. To date, 45 states have enacted motor carrier transportation anti-indemnity laws. Generally, these statutes take one of two forms: (1) they prohibit requirements in indemnification agreements where the motor carrier must indemnify the non-motor carrier, usually a shipper or broker, for liability arising out of the non-motor carrier’s negligent or intentional acts; or (2) they prohibit indemnification provisions in motor carrier contracts that have the effect of indemnifying an indemnitee for the indemnitee’s negligent or intentional acts.”).