Ga. Nut Co. v. C.H. Robinson Co.

GEORGIA NUT COMPANY, Plaintiff, v. C.H. ROBINSON COMPANY d/b/a Robinson Fresh,and ALL INTERSTATE TRUCKING LLC, Defendant.

No. 17 C 3018

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

October 26, 2017

Judge Sara L. Ellis

OPINION AND ORDER

Plaintiff Georgia Nut Company ("Georgia Nut") brings this action against Defendants' C.H. Robinson Company ("C.H. Robinson") and All Interstate Trucking ("AI Trucking"), for their failure to deliver 42,000 pounds of almonds. Georgia Nut brings claims for negligent hiring and negligent supervision against C.H. Robinson (Count I), C.H. Robinson's negligent performance in its voluntary undertaking of submitting a claim to the insurer (Count II), and a Carmack Amendment violation against AI Trucking (Count III). Defendant C.H. Robinson moves to dismiss Count I and Count II arguing that both Counts are preempted by the Federal Aviation Administration Authorization Act ("FAAAA"), 49 U.S.C. § 14501, because they seek relief under state laws that have an effect on the prices, routes, or services of freight brokers covered by the FAAAA. Because the hiring and supervision of a shipping company is within the definition of transportation services covered by the FAAAA and enforcement of the state-law negligence claims relating to these services would have a significant effect on these services, the FAAAA preempts state-law negligent hiring and negligent supervision claims, and the Court grants the motion to dismiss Count I. But because C.H. Robinson has failed to show that the submission of the insurance claims relates to transportation services, the Court denies the motion to dismiss Count II.

BACKGROUND¹

Georgia Nut hired freight broker C.H. Robinson, who hired motor carrier AI Trucking, to deliver 42,000 pounds of almonds from Livingston, California to Niles, Illinois. While no written contract existed between Georgia Nut and C.H. Robinson, the freight broker agreed to arrange the shipment of almonds for payment. Georgia Nut directed C.H. Robinson to ship the almonds directly from Livingston, California to Niles, Illinois without any detours during the route.

On Friday, June 17, 2016, AI Trucking took possession of the almonds from the Del Rio Nut facility. Upon pick up, Georgia Nut paid Del Rio Nut Company $162,960 for the almonds. After the truck was loaded, someone from Del Rio Nut placed an industry-standard, tamper-proof band with a unique load-identifying seal number that matched the sale number on the bill of lading on the cargo door. Between June 17 and June 21, 2016, AI Trucking routed the shipment of almonds through the state of Georgia on its way from Livingston, California to Niles, Illinois. AI Trucking failed to adhere to Georgia Nut's directive by shipping the almonds through the state of Georgia on its way to Illinois, rather than going directly from California to Illinois.

On Tuesday June 21, 2016, AI Trucking delivered the shipment of almonds to Georgia Nut's facility in Niles, Illinois. Upon delivery of the almonds in Niles, Illinois, Georgia Nut discovered that the band seal number on the cargo door did not match the unique load-identifying seal number for the bill of lading. Because band tampering renders the almondsunusable for human consumption, Georgia Nut rejected the shipment upon delivery and did not receive any reimbursement for the total loss from the almonds.

On July 6, 2016, Georgia Nut provided a Standard Form for Presentation of Loss and Damages Claims to C.H. Robinson, who then submitted a claim to the insurer. C.H. Robinson required Georgia Nut to use C.H. Robinson to handle all aspects of the process of making a claim with the insurer. Until February 2017, C.H. Robinson disclosed no information about the insurance claim to Georgia Nut, at which point C.H. Robinson solely revealed the identity of the insurer.

AI Trucking was established in July of 2015 and was administratively dissolved on December 7, 2016. Public Federal Motor Carrier Safety Administration (FMCSA) records show that AI Trucking had one driver and drove one mile in 2015.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. 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.

ANALYSIS

I. Preemption Under the Federal Aviation Administration Authorization Act (FAAAA)

C.H. Robinson argues that the claims in Count I and Count II relate to the services C.H. Robinson provides as a broker, and therefore the FAAAA expressly preempts Georgia Nut's negligent hiring and negligent supervision claim and its claim of C.H. Robinson's negligence in its submitting a claim to the insurer .

The FAAAA express preemption clause states, in relevant part:

[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 private motor carrier, broker or freight forwarder with respect to the transportation of property.

49 U.S.C. § 14501(c)(1).² "The FAAAA's preemption clause prohibits enforcement of state laws 'related to a price, route, or service of any" broker "with respect to the transportation of property.'" Dan's City Used Cars, Inc. v. Pelkey, 569 U.S. 251, 260, 133 S. Ct. 1769, 185 L. Ed. 2d 909 (2013) (quoting 49 U.S.C. § 14501(c)(1)). Transportation is defined in Title 49 "as 'services related to th[e] movement' of property, 'including arranging for, receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, packing, unpacking, and interchange of passengers and property.'" Id. at 261 (quoting 49 U.S.C. § 13102(23)(B)).

In determining whether a state law claim is subject to FAAAA preemption, the Seventh Circuit stated that two requirements must be met: "First, a state must have enacted or attempted to enforce a law. Second, that law must relate to carrier rates, routes, or services 'either byexpressly referring to them, or by having a significant economic effect on them.'" Nationwide Freight Sys., Inc. v. Ill. Commerce Comm'n, 784 F.3d 367, 373-74 (7th Cir. 2015) (quoting Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1432 (7th Cir. 1996)). Preemption under the FAAAA is broad, and includes "laws and actions having some type of connection with or reference to a carrier's rates, routes, or services, whether direct or indirect." Id. at 373. But state laws are "not preempted where [their] relationship with carrier rates, routes, or services is 'tenuous, remote, or peripheral.'" Id. quoting Dan's City Used Cars, 569 U.S. at 261. Finally, "federal preemption is an affirmative defense upon which the defendants bear the burden of proof." Fifth Third Bank ex rel. Tr. Officer v. CSX Corp., 415 F.3d 741, 745 (7th Cir. 2005).

A. Negligent Supervision and Negligent Hiring

Georgia Nut alleges that C.H. Robinson failed to hire a legitimate transportation company to carry a shipment of 42,000 pounds of almonds from Livingston, California directly to Niles, Illinois, breaching its duty of reasonable care. C.H. Robinson argues that the FAAAA preempts this claim because it relates to C.H. Robinson's services as a freight broker because it attempts to regulate C.H. Robinson's transportation services. Georgia Nut argues that FAAAA preemption does not apply to this claim because the effect on prices, routes, or services is too tenuous to invoke FAAAA preemption, and because the claim is similar to a breach of contract claim in that it is based on C.H. Robinson's "self-imposed undertakings." Doc. 19 at 3.

State common-law negligence claims satisfy the first requirement for preemption under the FAAAA. See United Airlines, Inc. v. Mesa Airlines, Inc., 219 F.3d 605, 607 (7th Cir. 2000) (holding that state common law satisfies the first requirement in ADA preemption cases). Therefore, this case turns on whether C.H. Robinson's alleged negligent supervision andnegligent hiring relates to its services as a freight broker by either expressly referring to them or by having a significant economic effect on those services.

While the services of a freight broker do not include the actual transportation of property, they are focused on arranging how others will transport the property; these services, therefore, fall within the scope of the FAAAA preemption . Midwest Trading Grp., Inc. v. GlobalTranz Enters., Inc., No. 12 C 9313, 2015 WL 1043554, at *3 (N.D. Ill. Mar. 5, 2015). Central to C.H. Robinson's efforts to perform its services as a broker was the hiring of AI Trucking to transport the almonds. It is C.H. Robinson's alleged negligence in performing this duty that forms the basis of Georgia Nut's claim in Count I.

Common-law negligent hiring and negligent supervision claims do not expressly reference freight broker services; however, they do have a significant economic effect on those services. The purpose of the FAAAA preemption was to free interstate shipping from a patchwork of state laws and regulations and to replace those rules with "competitive market forces." Rowe v. N.H. Motor Transp. Ass'n, 552 U.S. 364,...