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concluding that a similar statute preempted the plaintiff's tort claims because they were connected to the rates that the plaintiff "was charging, however unwittingly, to its customers"
Summary of this case from Aloha Airlines, Inc. v. Mesa Air Group, Inc.Opinion
Civil Action No. 2:06-CV-1517-LDD.
July 14, 2006
MEMORANDUM OPINION
Presently before the Court are defendant's motion to dismiss (Doc. No. 4), plaintiff's brief in opposition (Doc. No. 8), and defendant's reply brief thereto (Doc. No. 11). For the following reasons, this Court grants defendant's motion to dismiss.
I. Factual and Procedural History
On April 21, 1997, plaintiff Yellow Transportation, Inc. ("plaintiff"), an interstate motor carrier, entered into a transportation agreement ("DM agreement") with defendant DM Transportation Management Services, Inc. ("defendant"), a freight broker which arranges the transportation of freight for multiple shippers via multiple carriers. (See Compl., at ¶¶ 1, 4, 7). Pursuant to the DM agreement, plaintiff performed transportation services for certain DM customers/shippers. (Id., at ¶ 7).
Plaintiff subsequently entered into an agreement with AOL Time Warner, Inc. ("AOL"); this agreement ("AOL agreement") required plaintiff to transport freight for AOL at substantially discounted rates, in exchange for an anticipated high volume of freight. (Id., at ¶ 9). Due to the discount in rates, AOL's agents were instructed to indicate on the bill of lading issued to plaintiff that the shipment was moving according to the AOL agreement. (Id., at ¶¶ 11, 16).
Subsequent to the execution of the AOL agreement, AOL notified plaintiff that defendant was going to function as its agent to receive, audit, correct, and pay freight bills on AOL's behalf, under the AOL trade name "Online Direct." (Id., at ¶ 13). Plaintiff, on behalf of AOL, was required to bill defendant directly. (Id., at ¶ 15). Defendant was then required to pay plaintiff for plaintiff's transportation services pursuant to the AOL agreement. (Id.).
Plaintiff alleges that defendant improperly directed its non-AOL shipper customers to use the AOL trade name on bills of lading issued to plaintiff, thereby receiving a discounted freight rate from plaintiff. (Id., at ¶ 18). Plaintiff specifically alleges that defendant misinformed plaintiff that freight was being transported on behalf of AOL, when, in actuality, plaintiff was transporting a shipment on behalf of defendant's customers with no connection to AOL. (Id., at ¶ 19).
Plaintiff filed a complaint against defendant on April 11, 2006. (See Doc. No. 1). Plaintiff alleges the existence of diversity jurisdiction, and brings state law claims sounding in misrepresentation, breach of contract, unjust enrichment, quantum meruit, and fraud. (Id.). On May 5, 2006, defendant filed a motion for partial dismissal pursuant to Rule 12(b)(6), to which plaintiff responded on June 9, 2006. (See Doc. No. 4, 8). Defendant subsequently filed a reply brief on June 27, 2006. (See Doc. No. 11).
II. Discussion
A Rule 12(b)(6) motion may be granted only when it clearly appears that a plaintiff can prove no set of facts in support of the claim which would entitle her to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Robb v. City of Philadelphia, 733 F.2d 286, 290 (3d Cir. 1984). In applying this standard, this Court "must take all the well pleaded allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the pleadings, the plaintiff may be entitled to relief." Colburn v. Upper Darby Township, 838 F.2d 663, 665-66 (3d Cir. 1988). However, this Court need not credit bald assertions or legal conclusions in deciding a motion to dismiss. See, e.g., Morse v. Lower Merion School Dist., 132 F.3d 902, 907 (3d Cir. 1997).
A. Preemption
Defendant argues that plaintiff's misrepresentation, unjust enrichment, quantum meruit, and fraud claims are preempted by 49 U.S.C. § 14501(c)(1) of the Interstate Commerce Commission Termination Act ("ICCTA"). (See Def. Br., at 4).
1. Standard
The ICCTA removes a states' regulatory power over certain types of carriers. The preemptive provision of the ICCTA prohibits a state from "enact[ing] or enforc[ing] a law, regulation or other provision having the force and effect of law related to a price, route, or service of any motor carrier. . . ." 49 U.S.C. § 14501(c)(1) (emphasis added). This preemptive provision was originally part of the Federal Aviation Administration Authority Act ("FAAAA"), which was passed by Congress in 1994 and made effective on January 1, 1995. See, e.g., Deerskin Trading Post, Inc. v. United Parcel Serv. Of America Inc., 972 F. Supp. 665, 667 (N.D. Ga. 1997). It was modeled on the language found in the Airline Deregulation Act of 1978 ("ADA"). See, e.g., Rockwell v. United Parcel Serv., Inc., 1999 WL 33100089, at *1 (D.Vt. July 7, 1999).
Although the Supreme Court has yet to interpret the preemptive provision of the ICCTA, it has interpreted a virtually identical preemptive provision in the ADA in a broad and expansive manner. See, e.g., Gary v. The Air Group, Inc., 397 F.3d 183, 186 (3d Cir. 2005) (noting that Supreme Court has given "broad interpretation" to preemption provision of ADA); Rockwell v. United Parcel Serv., Inc., 1999 WL 33100089, at *1 (D.Vt. July 7, 1999) (preemption provision of § 14501(c)(1) is interpreted "broadly and expansively"). In the context of the ADA, the Supreme Court has construed the words "relating to" as preempting all state enforcement actions "having a connection with or reference to airline `rates, routes, or services'" in more than a tenuous, remote, or peripheral manner. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383-384 (1992). Furthermore, the Supreme Court has construed the phrase "enact or enforce any law" as prohibiting the enforcement of state laws, statutes, regulations, or policies beyond the confines of the contractual agreement between parties, such as state tort claims, which impose obligations external to the conditions to which the parties voluntarily agreed. American Airlines, Inc. v. Wolens, 513 U.S. 219, 232-233 (1995).
At the time of the Morales decision, the preemption provision of the ADA stated: "[N]o state . . . shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of an air carrier. . . ." 49 U.S.C. § 1305(a)(1).
This provision, which was revised in 1994 without significant change, now reads: [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 an air carrier that may provide air transportation under this subpart." 49 U.S.C. § 41713(b)(1); see Wolens, 513 U.S. at 821.
The Supreme Court's broad construction of the preemption provision of the ADA provides an analogical template by which to interpret § 14501(c)(1) of the ICCTA. See, e.g., Mastercraft Interiors, Ltd. v. ABF Freight Sys., Inc., 284 F. Supp. 2d 284, 286-288 (D. Md. 2003). Applying Supreme Court precedent, courts have concluded that § 14501(c)(1) of the ICCTA preempts all state claims having more than a tenuous, remote, or peripheral connection with, or effect on, a carriers' rates, so long as the claims seek to enforce state laws, policies, or regulations external to the mutually brokered agreement between the parties. Id.; Deerskin Trading Post, Inc. v. United Parcel Serv. Of America Inc., 972 F. Supp. 665, 672-673 (N.D. Ga. 1997); Western Parcel Express v. United Parcel Serv. Of America, Inc., 1996 WL 756858, at *1-2 (N.D. Cal. Dec. 3, 1996). In other words, a state claim is preempted under § 14501(c)(1) of the ITTCA when: (1) the subject of the claim expressly refers to, or has more than a tenuous effect upon, a motor carrier's rates, routes, and services; and (2) the claim involves the enforcement of a state law, regulation, or policy which exceeds those conditions voluntarily agreed upon by the parties. See, e.g., Woolens, 513 U.S. at 226; Travel All Over The World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1432 (7th Cir. 1996);Deerskin Trading Post, Inc., 972 F. Supp. at 672-673.
2. Application
It is clear that the factual predicate of plaintiff's misrepresentation, unjust enrichment, quantum meruit, and fraud claims expressly concern, or, at the very least, have a connection with, the rates plaintiff was charging, however unwittingly, to its customers. Indeed, plaintiff's complaint alleges that plaintiff was defrauded when defendant misappropriated AOL's discount and offered this discount to other shippers connected with defendant, thereby improperly influencing the price and collection of plaintiff's rates, as well as the value of plaintiff's transportation services. (See Compl., at ¶¶ 18-20); (Pl. Br., at 3) (defendant's conduct allegedly eliminated plaintiff's "ability to negotiate fair terms and make an informed decision as to the appropriate rate"). It is also clear, based upon applicable case law, that these tort and quasi-contract claims implicate state interests external to the contractual relationship between the parties, thus constituting a state enforcement action "related to" plaintiff's "price." See, e.g., Deerskin Trading Post, Inc., 972 F. Supp. at 673 (shipper's state law fraud, negligence, gross negligence, unjust enrichment, and constructive trust claims against carrier preempted by 49 U.S.C. § 14501(c)(1) of ICCTA and § 41713(b)(4) of FAAAA); Mastercraft Interiors, Ltd., 284 F. Supp. 2d at 288 (shipper's state law misrepresentation, negligent misrepresentation, and unjust enrichment claims against motor carrier preempted by § 14501(c)(1) of ICCTA, as these claims implicate state policies that exceed contractual bargain between parties); Osband v. United Airlines, Inc., 981 P.2d 616, 623 (Co. Ct. App. 1998) (promissory estoppel claim by shipper against common carrier preempted by § 41713(b)(1) of FAAAA, as promissory estoppel is an "equitable principle, not dependent on the existence of a contract under state law").
In fact, plaintiff seems to concede that its misrepresentation, unjust enrichment, quantum meruit, and fraud claims are related to plaintiff's rates. (See Pl. Br., at 3, 5).
In reaching this conclusion, the Court rejects plaintiff's distinction between traditional tort claims brought by a shipper against a motor carrier regarding the carrier's unlawful rates, claims which plaintiff concedes are preempted, and the allegedly unique factual circumstances of this litigation, in which defendant, a freight broker, has allegedly manipulated the rates of a motor carrier to secure the benefit of a lower rate for its customers. (See Pl. Br., at 5). Although it is true that defendant only cites cases involving the application of § 14501(c)(1) to preempt tort claims by shippers against motor carriers, as compared to claims by motor carriers against shippers or other parties for the fraudulent manipulation of rates, the language of § 14501(c)(1) clearly applies to both situations; its applicability hinges on the subject matter and effect of each claim, rather than on the identity of the parties in the litigation. Nor does plaintiff persuasively analyze why the allegations in support of its non-contract-related claims do not fall within the express language of § 14501(c)(1); instead, plaintiff ignores the broad "relating to" language of this provision, contending that this preemption provision is inapplicable to claims that do "not challenge a carrier's rates." (See Pl. Br., at 5). Furthermore, to the extent that § 14501(c)(1) attempted to remove the states' regulatory power over the price, route, or service of motor carriers, thereby facilitating the deregulation of the motor carrier industry in favor of free market principles, the Court finds that the purposes of federal preemption are served by applying § 14501(c)(1) to litigation concerning the alleged manipulation of a carrier's rates, regardless of whether a shipper, broker, or carrier initiates suit. Indeed, plaintiff fails to offer an adequate, policy-based explanation as to why a common carrier should enjoy the benefit of state tort law to pursue rate-related claims against a shipper or broker, while shippers or brokers should be deprived of this legal option when pursuing rate-related tort claims against carriers. Finally, the Court notes that plaintiff fails to present a single case in support of its interpretation and application of § 14501(c)(1).
None of the cases cited by defendant hinge upon the identity of the plaintiff as a shipper.
This Court also rejects plaintiff's argument that defendant waived its right to argue preemption, based upon the application of 49 U.S.C. § 14101(b)(1), which permits a shipper and carrier to waive certain rights and remedies for contractual transportation services. (See Pl. Br., at 5-6). First, the language of § 14101(b)(1), which applies to the waiver of "rights and remedies," simply does not incorporate principles of preemption, which are neither a "right" nor a "remedy," but a jurisdictional component of the legislative regulation of the state/federal dynamic. Indeed, if the invocation of the preemption provision of § 14501(c)(1) was somehow waivable, the purposes behind the ICCTA would be severely impaired. More problematically, even if the parties could waive the application of § 14501(c)(1), plaintiff fails to identify a provision in the DM agreement, or any individual bill of lading, through which defendant waived the right to seek the defensive application of § 14501(c)(1). Finally, the Court notes that plaintiff cites no case law or administrative guidance in support of its interpretation of the interaction between § 14101(b)(1) and § 14501(c)(1).
In summary, the Court finds that plaintiff's misrepresentation, unjust enrichment, quantum meruit, and fraud claims are preempted by § 14501(c)(1) of the ITTCA. However, because § 14501(c)(1) does not apply to state law breach of contract claims, and because defendant has not moved to dismiss plaintiff's breach of contract claim, this claim survives.
By virtue of the Court's conclusion that plaintiff's non-contract related claims are preempted, the Court need not reach defendant's additional arguments that the gist of the action doctrine and the economic loss doctrine bar plaintiff's misrepresentation and fraud claims, that the existence of an express contract requires dismissal of plaintiff's unjust enrichment and quantum meruit claims, and that plaintiff's unjust enrichment and quantum meruit claims are duplicative. (See Pl. Br., at 7-12).
B. Attorneys' Fees
Defendant argues that plaintiff may not pursue punitive damages or attorneys' fees in its breach of contract action. (See Def. Br., at 12-13; Def. Reply Br., at 7-8). In response, plaintiff contends that punitive damages can include attorneys' fees and that punitive damages are appropriate because plaintiff has properly pled acts involving fraud. (See Pl. Br., at 11-12).
This Court finds that plaintiff may not recover attorneys' fees or punitive damages under its breach of contract claim. First, plaintiff does not expressly request attorneys' fees or punitive damages in the "wherefore" clause of its breach of contract claim. Second, punitive damages are unavailable for a breach of contract action under Pennsylvania law. See, e.g., Digregorio v. Keystone Health Plan East, 840 A.2d 361, 370 (Pa.Super.Ct. 2003) (plaintiff can not recover punitive damages for an action solely sounding in breach of contract); Standard Pipeline Coating Co., Inc. v. Solomon Teslovich, Inc., 496 A.2d 840, 844 (Pa.Super.Ct. 1985) ("punitive damages will not be assessed for a mere breach of contractual duties"). Nor does plaintiff's breach of contract claim, which does not contain an express provision authorizing attorneys' fees, provide the opportunity to recover attorneys' fees under Pennsylvania law. See, e.g., Merlino v. Delaware County, 556 Pa. 422, 425 (Pa. 1999) ("This Court has consistently followed the general, American rule that there can be no recovery of attorneys' fees from an adverse party, absent an express statutory authorization, a clear agreement by the parties or some other established exception"). Finally, because plaintiff's fraud claim has been preempted, plaintiff's lone argument in favor of the availability of attorneys' fees fails.
Plaintiff's request for punitive damages is preempted, too.See, e.g., Travel All Over The World Inc., 73 F.3d at 1432 n. 8; Deerskin Trading Post, Inc., 972 F. Supp. at 673 (punitive damages constitute enlargement of parties' bargain based upon state policy and, thus, request for punitive damages on remaining contract claim preempted by § 14501(c)(1)).
III. Conclusion
For the following reasons, this Court grants defendant's motion to dismiss plaintiff's fraud, misrepresentation, unjust enrichment, and quantum meruit claims on principles of preemption. Furthermore, the Court grants defendant's motion to strike plaintiff's request for attorneys' fees and punitive damages. An appropriate Order follows.
ORDER
AND NOW, this 13th day of June 2006, upon consideration of defendant's motion to dismiss (Doc. No. 4), plaintiff's brief in opposition (Doc. No. 8), and defendant's reply brief thereto (Doc. No. 11), it is hereby ORDERED as follows:1. Defendant's motion (Doc. No. 4) is GRANTED.
2. Plaintiff's misrepresentation, breach of contract, unjust enrichment, quantum meruit, and fraud claims are DISMISSED with prejudice.
3. Plaintiff request for attorneys' fees or punitive damages is DISMISSED with prejudice.