Georgia Nut Company v. C.H. Robinson Worldwide Inc. et al

Filing 26

OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court grants in part and denies in part C.H. Robinson's motion to dismiss Count I and Count II of the first amended complaint. The Court grants the motion with respect to Count I and denies the motion with respect to Count II. The Court dismisses Count I without prejudice to Georgia Nut filing an amended complaint. Signed by the Honorable Sara L. Ellis on 10/26/2017:Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
GEORGIA NUT COMPANY,

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

No. 17 C 3018
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, tamperproof 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 loadidentifying seal number for the bill of lading. Because band tampering renders the almonds
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The facts in the background section are taken from Plaintiff’s First Amended Complaint and are
presumed true for the purpose of resolving the motion to dismiss. See Virnich v. Vorwald, 664 F.3d 206,
212 (7th Cir.2011).

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unusable 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 wellpleaded 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.

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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 by
2

The FAAAA’s preemption language is borrowed from the Airline Deregulation Act of 1978 (“ADA”),
49 U.S.C. § 41713. Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 370, 128 S. Ct. 989, 169 L. Ed. 2d
933 (2008). Courts have generally incorporated judicial interpretations of the ADA’s functionally
identical preemption provision into their analysis of the FAAAA preemption provision. Id.

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expressly 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 and

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negligent 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, 371, 128 S. Ct. 989, 169 L. Ed. 2d
933 (2008) (describing Congress’ overarching goal in passing the ADA “as helping ensure
transportation rates, routes, and services that reflect ‘maximum reliance on competitive market
forces,’ thereby stimulating ‘efficiency, innovation, and low prices,’ as well as ‘variety’ and
‘quality’”). Enforcing state negligence laws that would have a direct and substantial impact on
the way in which freight brokers hire and oversee transportation companies would hinder this
objective of the FAAAA. The FAAAA does not allow courts to impute state-law derived rights
into transportation agreements, which would expand the bargained-for rights of the agreement.
See United Airlines, Inc., 219 F.3d at 609 (“[W]hen the state begins to change the parties’
financial arrangements . . . it is supplying external norms, a process that the national government

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has reserved to itself in the air transportation business.”). Therefore, Georgia Nut’s claim in
Count I meets the second requirement of FAAAA preemption.
Georgia Nut argues that its claim in Count I survives preemption because it is similar to a
contract claim. Courts have typically held that state contract claims are not preempted because
enforcement of contract provisions under state law is consistent with Congress’ purpose in
passing the preemption provision of the FAAAA. Am. Airlines, Inc. v. Wolens, 513 U.S. 219,
230, 115 S. Ct. 817, 130 L. Ed. 2d 715 (1995) (The ADA is designed to promote reliance on
competitive market forces, and those require an “effective means to enforce private
agreements.”). However, courts have also consistently held that claims that seek to expand a
plaintiff’s rights under their existing agreement are preempted. See S.C. Johnson, 697 F.3d at
558 (stating that theories of tortious interference with contract, breach of fiduciary duty, and
fraudulent inducement to enter a contract are preempted because they are efforts to change the
bargain that the parties had reached). Georgia Nut’s negligent hiring and negligent supervision
claim is just such a claim. Georgia Nut and C.H. Robinson entered into an oral agreement for
Georgia Nut to pay C.H. Robinson to arrange for the shipment of almonds from California to
Illinois. Whether the series of events that ultimately led to Georgia Nut receiving a shipment of
unusable nuts breaches this agreement is a separate question from whether C.H. Robinson
committed the torts of negligent supervision and negligent hiring. Allowing Georgia Nut to
proceed on this tort theory as though it were a contract claim would go beyond enforcing the
parties’ bargain and would in effect modify or enhance the bargain in a manner the parties did
not negotiate or agree. See United Airlines, Inc., 219 F.3d at 609 (claims that enlarge or enhance
the parties’ agreement based on state laws that are external to the agreement are preempted).
Georgia Nut argues that, “[t]he fact that one claim involves negligence law and the other

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involves contract law is a difference without a distinction.” Doc. 19 at 4. This is incorrect. The
Supreme Court specifically noted that there is a key distinction between contract claims and
negligence claims, which is dispositive for purposes of preemption. Wolens, 513 U.S. at 233
(“This distinction between what the State dictates and what the airline itself undertakes confines
courts, in breach-of-contract actions, to the parties’ bargain, with no enlargement or
enhancement based on state laws or policies external to the agreement.”). The Court finds no
basis in the law to exempt contract-like negligence claims from the preemptive effect of the
FAAAA. Therefore, the Court grants the motion to dismiss Count I.
B.

Negligent Voluntary Undertaking – Insurance Claim Submission

Georgia Nut also alleges that C.H. Robinson performed negligently in its voluntary
undertaking of submitting a claim to the insurer. C.H. Robinson argues that this negligence
claim is preempted by the FAAAA.
Because Count II seeks to enforce state common law, the first prong of the Seventh
Circuit’s test to determine whether a claim is preempted by the FAAAA is satisfied. United
Airlines, Inc., 219 F.3d at 607. Therefore this claim also turns on whether the services provided
by C.H. Robinson in submitting a claim to the insurer relate to its services as a freight broker and
if so, whether the negligent voluntary undertaking claim regulates those services by expressly
referring to them or by having a significant economic effect on them.
The FAAAA preempts state-laws that relate to broker services provided with respect to
the transportation of property. 49 U.S.C. § 14501(c)(1). “Transportation of property” is a key
limitation on the breadth of the preemptive effect of the FAAAA. Dan’s City, 569 U.S. at 261
(The phrase “with respect to the transportation of property ” “‘massively limits the scope of
preemption’ ordered by the FAAAA.”) (quoting City of Columbus v. Ours Garage & Wrecker

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Serv., Inc., 536 U.S. 424, 449, 122 S. Ct. 2226, 153 L. Ed. 2d 430 (2002)). As noted above, Title
49 defines transportation “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)).
Processing of insurance claims after shipping is complete is not listed in Title 49 as a
service related to the movement of property. However, the list of services under Title 49 is nonexhaustive. In support of its argument that claims handling is a service related to the
transportation of property, C.H. Robinson cites to Tirgan v. Roadway Package Systems, Inc., No.
CIV. A. 94-2768(JEI), 1995 WL 21098 (D.N.J. Jan. 3, 1995), which held that claims for bad
faith handling of damages claims by interstate shippers are preempted by the Carmack
Amendment, 49 U.S.C. § 11707. C.H. Robinson asserts, without citation, that the preemptory
effect of the Carmack Amendment is “narrower” than FAAAA, and that if claim processing is
preempted by the Carmack Amendment it “stands to reason” that it is preempted under the
FAAAA as well. Doc. 21 at 9.
The burden of establishing that federal law preempts a state law belongs to the party
seeking to invoke preemption. CSX Corp., 415 F.3d at 745. C.H. Robinson does not provide
any evidence or citation showing that processing these claims on behalf of a client is central to
role of a broker in the transportation of property. It is not clear how processing an insurance
claim well after the completion of shipping relates to the act of arranging for the delivery of
property. The fact that similar claims are preempted under the Carmack Amendment is perhaps
informative, but C.H. Robinson has not developed this argument beyond the unsupported
statements that the Carmack Amendment preemption is more narrow than the FAAAA and that it

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is therefore reasonable that things preempted under the Carmack Amendment are preempted
under the FAAAA. This may be true, but C.H. Robinson has not shown it to be so, and the
Court will not research and make C.H. Robinson’s arguments for it. See Economy Folding Box
Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 721 (7th Cir. 2008) (“It is not the court’s
responsibility to research the law and construct the parties’ arguments for them.”). Because C.H.
Robinson has failed to show that processing insurance claims is a service related to the
movement of property, it has failed to meet its burden to demonstrate that federal law preempts
the claim in Count II. The Court, therefore, denies C.H. Robinson’s motion to dismiss Count II.
CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part C.H. Robinson’s
motion to dismiss Count I and Count II of the first amended complaint. The Court grants the
motion with respect to Count I and denies the motion with respect to Count II. The Court
dismisses Count I without prejudice to Georgia Nut filing an amended complaint.

Dated: October 26, 2017

______________________
SARA L. ELLIS
United States District Judge

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