DNOW, LP v. Tricon Precast LTD et al.
MEMORANDUM AND ORDER granting 10 MOTION to Remand, denying as moot 13 MOTION Opposed Motion to Authorize Limited Jurisdictional Discovery and To Stay Briefing on Plaintiff's Motion to Remand, denying as moot 3 MOTION to Dismiss (Signed by Judge Keith P Ellison) Parties notified.(arrivera, 4)
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
PALADIN FREIGHT SOLUTIONS,
INC., et al,
January 12, 2018
David J. Bradley, Clerk
§ CIVIL ACTION NO. 4:17-CV-3369
MEMORANDUM & ORDER
A truck driver was delivering concrete barriers when he allegedly struck a fire hydrant on
the premises and caused serious property damage. The concrete barriers’ buyer, Plaintiff DNOW
L.P., sued the barriers’ seller, Defendant Tricon Precast Ltd.; the driver, Defendant Luis Acosta
Hernandez d/b/a L&M Eagle Express; and the freight broker who hired the driver, Defendant
Paladin Freight Solutions, Inc. (Doc. No. 1-1.) Paladin removed the case from state district court
in Harris County, Texas, arguing that federal law completely preempts DNOW’s claim against
Paladin. (Doc. No. 1.)
Conflicting motions are now pending before this Court: Paladin’s Motion to Dismiss
(Doc. No. 3), and DNOW’s Motion to Remand (Doc. No. 10). Paladin has also moved for
limited jurisdictional discovery and a stay of DNOW’s Motion to Remand (Doc. No. 13),
responding to a potential procedural defect that DNOW raised in its Motion to Remand. Based
on careful consideration of the filings and applicable law, the Court GRANTS DNOW’s Motion
to Remand, DENIES Paladin’s Motion to Dismiss, and DENIES AS MOOT Paladin’s motion
for limited discovery.
The following facts are drawn from the Original Petition that DNOW filed in the 215th
Judicial District Court in Harris County, Texas. (Doc. No. 1-1.) DNOW is a Texas limited
partnership. In January 2017, DNOW ordered twenty “concrete reinforced barriers” from Tricon,
another Texas L.P. (Id. at 2.) Tricon was to deliver them several days later to premises belonging
to a customer of DNOW, located in Cleburne, Texas. (Id.) Tricon contracted with Paladin, a
Tennessee corporation, to handle the delivery, which in turn contracted with L&M.1 (Id. at 2–3.)
According to DNOW, the “driver, while delivering the barriers on behalf of Tricon, negligently
crashed his truck into a fire hydrant on the premises, which caused substantial property damage.”
(Id. at 3.) Using “PFS” for Paladin, DNOW pointedly links this driver to Paladin, referring to the
driver as “PFS/L&M’s driver.” (Id.) After the accident, DNOW evidently had to reimburse its
customer for the damage. (Id.)
DNOW now sues Tricon for breach of contract, citing an indemnification provision in its
purchase order for the concrete barriers. (Doc. No. 1-1 at 3–4.) DNOW also sues Paladin and
L&M for negligence, owing to the following failures: “failure to maintain a proper lookout while
driving”; “failure to maintain control of a vehicle”; “failure to maintain a single lane of traffic”;
“failure to operate a vehicle in a reasonable manner”; “failure to apply the brakes to avoid a
collision”; and “failure to maintain safe and clear distance.” (Id. at 4.) DNOW’s negligence
theories all concern the operation of the vehicle that caused the accident; none concerns
Paladin’s procedures for selecting or monitoring carriers.
According to DNOW, L&M Eagle Express is “an assumed name” for Luis Acosta Hernandez,
who resides in Harris County, Texas. (Doc. No. 1-1 at 1–2.)
On November 3, 2017, Paladin removed the case to this Court.2 (Doc. No. 1.) Paladin
asserts that it is a licensed freight broker,3 and so DNOW’s negligence claim against Paladin is
completely preempted by 49 U.S.C. § 14501(b)(1), an express preemption provision for freight
forwarders and brokers. In Paladin’s view, this provision mandates dismissal of DNOW’s
negligence claim. (Doc. No. 3-2 at 10–11.) DNOW disagrees on both points, seeking remand to
state court where it believes it can properly pursue its negligence claim against Paladin.
Accordingly, this Court’s subject-matter jurisdiction and the fate of DNOW’s claim against
Paladin turn on the interpretation of 49 U.S.C. § 14501(b)(1).
a. Removal and Remand
Generally, “any civil action brought in a State court of which the district courts of the
United States have original jurisdiction, may be removed by the defendant or the defendants, to
the district court of the United States for the district and division embracing the place where such
action is pending.” 28 U.S.C. § 1441(a). Removal is therefore possible for “all civil actions
arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “Under
the well-pleaded complaint rule, a federal court does not have federal question jurisdiction unless
a federal question appears on the face of the plaintiff's well-pleaded complaint.” Elam v. Kansas
City Southern Railway Co., 635 F.3d 796, 803 (5th Cir. 2011). “An exception to the well2
In its Notice of Removal, Paladin represented that Defendant Hernandez had not yet entered an
appearance, and so his consent or opposition to removal had not been established. (Doc. No. 1 at
5.) Defendant Tricon consented to removal. (Doc. No. 1-3.) Tricon also does not oppose
DNOW’s motion to remand this case to state court. (Doc. No. 10 at 7.)
The Court assumes the truth of this assertion for the sake of this decision. It therefore has no
need to rule on Paladin’s Request for Judicial Notice (Doc. No. 4) or consider its exhibit (Doc.
pleaded complaint rule arises when Congress ‘so completely preempt[s] a particular area that any
civil complaint raising this select group of claims is necessarily federal in character.’” Id.
(quoting Gutierrez v. Flores, 543 F.3d 248, 252 (5th Cir. 2008)). “When the federal statute
completely pre-empts the state-law cause of action, a claim which comes within the scope of that
cause of action, even if pleaded in terms of state law, is in reality based on federal law.”
Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 8 (2003).
If a federal court lacks subject-matter jurisdiction over a removed case, remand is
required. “If at any time before final judgment it appears that the district court lacks subject
matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). “Removal deprives the
plaintiff of his chosen forum, and every day litigating in federal court is a day spent not litigating
in state court. It is imperative that a motion to remand be resolved as swiftly as possible so that
the plaintiff maintains his right to choose the forum in which to litigate.” Guillory v. PPG
Industries, Inc., 434 F.3d 303, 310 (5th Cir. 2005).
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal for “failure to
state a claim upon which relief can be granted.” “To prevail against a defendant’s motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff’s complaint must contain
sufficient factual matter, if accepted as true, to state a claim to relief that is plausible on its face.”
Anderson v. Valdez, 845 F.3d 580, 589 (5th Cir. 2016) (cleaned up). “A claim is facially
plausible if the complaint allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. (quotation omitted).
“Under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, state laws that ‘interfere with,
or are contrary to the laws of congress, made in pursuance of the constitution’ are invalid.” Wisc.
Pub. Intervenor v. Mortier, 501 U.S. 597, 604 (1991) (quoting Gibbons v. Ogden, 22 U.S. 1, 211
(1824)). The preemption of state law by federal law “in the first instance turn[s] on congressional
intent,” which Congress may state expressly in a statute’s text. Id. “When considering preemption, ‘we start with the assumption that the historic police powers of the States were not to be
superseded by the Federal Act unless that was the clear and manifest purpose of Congress.’” Id.
at 605 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).
The present preemption question arises from Congress’s deregulation of the air and
surface transportation industries. In 1978, thinking that greater reliance on competitive market
forces and lesser reliance on government regulation would improve prices and services in the
airline industry, Congress passed the Airline Deregulation Act, now codified at 49 U.S.C. §
40101 et seq. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378–79 (1992). To prevent
piecemeal state regulation filling the federal regulatory void, Congress expressly preempted any
state provision with the effect of law “relating to rates, routes, or services” of any air carrier. Id.
(quoting 49 U.S.C. § 1305 (1988 ed.)).4
The statute currently reads as follows: “Except as provided in this subsection, a State, political
subdivision of a State, or political authority of at least 2 States 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. §
Two years later, Congress passed the Motor Carrier Act, which effected a similar
deregulation of the trucking industry. Rowe v. New Hampshire Motor Transp. Ass’n, 552 U.S.
364, 368 (2008). In 1994, Congress added an express preemption provision, 49 U.S.C. § 14501,
for motor carriers, freight forwarders, and freight brokers when it passed the Federal Aviation
Administration Authorization Act (FAAAA).5 Id. Of paramount importance to its interpretation,
Congress modeled it directly on the preemption provision in the Airline Deregulation Act. Id.
The interpretation of the two provisions has been intertwined ever since. Id. at 370.
49 U.S.C. § 14501 has three subsections: (a) for motor carriers of passengers, (b) for
freight forwarders and brokers, and (c) for motor carriers of property. Subsection (b), the
relevant part here, provides that “no State or political subdivision thereof … shall enact or
enforce any law, rule, regulation, standard, or other provision having the force and effect of law
relating to intrastate rates, intrastate routes, or intrastate services of any freight forwarder or
broker.” 49 U.S.C. § 14501(b)(1).
The primary difficulty in determining preemption is deciding whether a given state law or
enforcement action relates to rates, routes, or services. Construing 49 U.S.C. § 14501(c)(1), the
preemption provision for carriers of property, the Supreme Court has said that state laws and
actions are preempted that “hav[e] a connection with, or reference to” rates, routes, or services.
Rowe, 552 U.S. at 370 (quoting Morales, 504 U.S. at 384). A state law can be preempted even if
its effect on rates, routes, or services is “only indirect” and seems to be consistent with the aims
of federal law. Id. (citing Morales, 504 U.S. at 386–87). The extent to which a state law must
alter or influence rates, routes, or services in order to be preempted is somewhat unclear, but
Courts often refer to this provision as a part of the Interstate Commerce Commission
Termination Act of 1995, which preserved the provision precisely as it was enacted the year
before in the FAAAA.
preemption “occurs at least where state laws have a ‘significant impact’ related to Congress’
deregulatory and preemption-related objectives.” Id. (quoting Morales, 504 U.S. at 390). But
where the state law’s effect is only “tenuous, remote, or peripheral,” preemption does not
necessarily occur. Id. (quoting Morales, 504 U.S. at 390).
Based on this construction of the statute, the Supreme Court concluded that federal law
preempted Maine’s attempt to control the distribution of cigarettes through specific regulations
on motor carriers. Rowe, 552 U.S. at 371. It reached the same conclusion for trucking regulations
that the Port of Los Angeles’s Board of Harbor Commissioners adopted in order to lessen
pollution and promote safety there. Amer. Trucking Ass’ns, Inc. v. City of Los Angeles, 569 U.S.
641, 644 (2013).
Paladin now asserts that 49 U.S.C. § 14501(b) preempts DNOW’s negligence claim
arising from the accident in this case. (Doc. No. 3-2 at 10–11.) It is settled that “state commonlaw rules” are “provisions” with the “force and effect of law” for the purposes of preemption
under the Airline Deregulation Act. Nw., Inc. v. Ginsberg, 134 S. Ct. 1422, 1429 (2014). The
Court adheres to that interpretation for the preemption provision at issue here.
The dispute between DNOW and Paladin is whether a state-law negligence claim “relates
to” rates, routes, or services. In Paladin’s view, DNOW’s negligence claim implies that Paladin
should engage in some sort of additional safety practices in order to avoid liability for its drivers’
accidents. This amounts to using state law to change Paladin’s safety practices, which
necessarily affects Paladin’s services. (Doc. No. 3-2 at 8.)
DNOW’s response is twofold. First, it notes that Paladin misconstrues DNOW’s
negligence claim as negligent entrustment or negligent hiring, but it is simply a general
negligence claim about the unsafe operation of a truck. (Doc. No. 11 at 6.) While the former
might implicitly impose constraints on the operations of a freight broker like Paladin, the latter
does not. Second, DNOW relies on the Supreme Court’s statements in Rowe about the precise
contours of the FAAAA preemption provision. (Id. at 6–7.) The Supreme Court said there that 49
U.S.C. § 14501(c)(1), the provision applying to carriers of property, does not necessarily
preempt “state regulation that broadly prohibits certain forms of conduct and affects, say,
truckdrivers, only in their capacity as members of the public.” 552 U.S. at 375. It also said that
federal law does not preempt state laws affecting rates, routes, or services in “too tenuous,
remote, or peripheral a manner.” Id. As DNOW sees it, the law of negligence applies generally,
broadly, and therefore too tenuously to Paladin to be preempted.
Rowe offers limited guidance here. The state law it struck down, an idiosyncratic Maine
scheme that specifically regulated truckers, was different in kind from the state law in question
here. Moreover, subsection (c) of § 14501, at issue in Rowe, contains an exception for state
“safety regulatory authority … with respect to motor vehicles.” Subsection (b), the relevant part
for this case, has no analogue. Decisions construing subsection (c) are only so useful.
Neither the Supreme Court nor the Fifth Circuit has ever apparently decided whether the
FAAAA preemption provisions apply to state tort actions like DNOW’s against Paladin. The
Fifth Circuit has, however, considered the Airline Deregulation Act’s preemption provision as
applied to state tort actions like negligence. See Hodges v. Delta Airlines, Inc., 44 F.3d 334 (5th
Cir. 1995) (en banc). In Hodges, the Fifth Circuit held that “federal preemption of state laws,
even certain common law actions ‘related to services’ of an air carrier, does not displace state
tort actions for personal physical injuries or property damage caused by the operation and
maintenance of aircraft.” Id. at 336. A passenger had been injured when a heavy box, dislodged
by another passenger, fell from an overhead bin and struck her. Id. at 335. She then sued the
airline for negligence. Id. The court found that “services,” as used in the federal preemption
provision, concerned features of air transportation like “boarding procedures,” “baggage
handling,” and “the transportation itself.” Id. While Congress had intended to deregulate these
features of air travel, it had not intended to “displac[e] state tort law.” Id. at 337.
recognized that “any state tort claim may ‘relate to’ services as a result of its indirect regulatory
impact on the airline’s practices,” but that interpretation would yield absurd results. Id. at 337–
38. “Taken to its logical extreme, this argument would suggest that a lawsuit following a fatal
airplane crash could relate to ‘services.’” Id. at 338.
Given the intertwined interpretation of the preemption provisions for air and surface
transportation, the Fifth Circuit’s decision in Hodges is tantamount to binding authority for the
present question. The Fifth Circuit rejected the expansive construction of “services” that Paladin
now advances, and it permitted a negligence claim quite like DNOW’s to proceed. As such, the
ruling in Hodges weighs strongly in favor of DNOW.
The Fifth Circuit’s jurisprudence in the adjacent realm of railroad regulation strengthens
this conclusion. See Elam v. Kansas City So. Ry. Co., 635 F.3d 796 (5th Cir. 2011). In Elam, the
Fifth Circuit considered whether federal law preempts state-law negligence claims against rail
carriers. Id. at 804. The Interstate Commerce Commission Termination Act of 1995, as already
noted, contained preemption provisions for air and motor carriers. Employing similar language,
it also vested exclusive jurisdiction “with respect to rates, classifications, rules, practices, routes,
services, and facilities of [rail] carriers” in the federal Surface Transportation Board, thereby
preempting equivalent state regulation. Id. at 804–05 (quoting 49 U.S.C. § 10501(b)). At issue in
Elam were a negligence per se claim and a general negligence claim against a railroad, arising
from the collision of a car and a train, which the railroad challenged on preemption grounds. Id.
at 801, 804. The Fifth Circuit drew an instructive distinction between the two types of negligence
claims. The negligence per se claim was based on a Mississippi “antiblocking” statute, which
limited the span of time that a train could obstruct a highway or street. Id. at 807 (citing MISS.
CODE § 77-9-235). The Fifth Circuit found that the effect of this negligence per se claim was “to
economically regulate [the railroad’s] switching operations,” and so it was completely
preempted. Id. at 807–08. The simple negligence claim, however, was not an “attempt to manage
or govern a railroad’s decisions in the economic realm.” Id. at 813. Finding no evidence that
“specific burdens” on the railroad’s operations would result from the negligence claim, the court
held that it was not preempted. Id. at 813–14.
The Fifth Circuit’s decisions in Hodges and Elam share a common foundation: the
principle that states retain their police powers to protect the health and safety of their citizens,
unless the “clear and manifest purpose of Congress” is to the contrary. Hodges, 44 F.3d at 338
(quoting California v. ARC America Corp., 490 U.S. 93, 102 (1989). See also Elam, 635 F.3d at
813 (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 475 (1996)). Based on that foundation and
on the Fifth Circuit’s careful distinctions in Hodges and Elam, this Court concludes that
DNOW’s negligence claim against Paladin is not preempted.
Paladin’s attempts to distinguish Hodges are unpersuasive. Paladin argues that Hodges
was focused on distinguishing “services” from “operations,” rather than on Congress’s intent to
deregulate the air and surface transportation industries, and that the Supreme Court rejected the
Hodges approach in Rowe. (Doc. No. 3-2 at 6.) Neither characterization is correct. In Hodges,
the Fifth Circuit’s discussion of “services,” a term in the statute’s text, was a necessary part of its
statutory interpretation. 44 F.3d at 336. That analysis also took full account of Congress’s
deregulatory aims. Id. at 336–37. Moreover, the Supreme Court’s decision in Rowe did not
repudiate the Fifth Circuit’s decision in Hodges in any sense.
Paladin also attempts to distinguish Hodges by noting that freight brokers are not
required to maintain liability insurance as carriers are, and so Congress must not have meant for
freight brokers to face any state liability. (Doc. No. 12 at 4–5.) It is true that the Fifth Circuit’s
decision in Hodges gleaned insight into congressional intent from the federal requirement that air
carriers maintain liability insurance, 44 F.3d at 338, but Hodges did not rest primarily on that
consideration. Its pillars were statutory interpretation and fundamental preemption principles.
The issue of liability insurance was just one of several considerations to which the Fifth Circuit
looked for confirmation of its core analysis. Id. at 337–39.
Paladin also unpersuasively relies on several district court decisions finding that 49
U.S.C. § 14501(c), the preemption provision for motor carriers of property, preempts negligence
claims. See AIG Europe Ltd. v. General System, Inc., 2014 WL 3671566 (D. Md. July 22, 2014);
Ameriswiss Tech., LLC v. Midway Line of Illinois, Inc., 888 F. Supp. 2d 197 (D.N.H. 2012);
Chatelaine, Inc. v. Twin Modal, Inc., 737 F. Supp. 2d 638 (N.D. Tex. 2010). One problem is that
other district courts have reached the contrary conclusion. See, e.g., Factory Mut. Ins. Co. v. One
Source Logistics, LLC, 2017 WL 2608867 (C.D. Cal. May 5, 2017); Cruz Miguel Aguina
Morales, et al., v. Redco Transport Ltd., et al., 2015 WL 9274068 (S.D. Tex. Dec. 21, 2015).
Another problem is that the injuries alleged in those cases are not analogous to the present one.
Cases like AIG Europe, Ameriswiss, and Chatelaine concern the safe delivery of shipments. In
each of those cases, the contents of a shipment arrived in damaged condition or not at all. But
here, DNOW sues not because its concrete barriers were damaged in transit, but because a driver
damaged his surroundings by failing to operate his vehicle safely. The former injury might be
within the preemptive scope of federal deregulatory law; the latter injury remains within the
scope of state tort law.
DNOW’s negligence claim is not preempted by federal law. This lawsuit therefore is a
non-diverse one, with Texas citizens on both sides, consisting solely of state claims. It does not
belong in federal court. Because remand is proper, it is not for this Court to pass judgment on the
facts of this case or to order further discovery into them.
Federal law does not preempt Plaintiff DNOW, L.P.’s claim against Defendant Paladin
Freight Solutions, Inc. Accordingly, Paladin’s Motion to Dismiss (Doc. No. 3) is DENIED.
Paladin’s Motion to Authorize Limited Jurisdictional Discovery and to Stay Briefing (Doc. No.
13) is DENIED AS MOOT. DNOW’s Motion to Remand (Doc. No. 10) is GRANTED. This
case is REMANDED to the 215th Judicial District Court in Harris County, Texas.
IT IS SO ORDERED.
SIGNED at Houston, Texas, on the 12th day of January, 2018.
HON. KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE
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