Nowakowski v. American Red Ball Transit Co.

No. 2--96--0838

___________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
___________________________________________________________________

RAY NOWAKOWSKI and LUCY ) Appeal from the Circuit Court
NOWAKOWSKI, ) of Lake County.
)
Plaintiffs-Appellants, ) No. 95--L--442
)
v. )
)
AMERICAN RED BALL TRANSIT )
COMPANY, INC., and ARROW )
MOVING AND STORAGE COMPANY, )
)
Defendants-Appellees )
)
(American Red Ball Transit )
Company, Inc., Third-Party )
Plaintiff and Third-Party )
Defendant, v. Arrow Moving )
and Storage Company, Third- ) Honorable
Party Defendant and Third- ) Peter M. Trobe,
Party Plaintiff). ) Judge, Presiding.
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JUSTICE RATHJE delivered the opinion of the court:
Plaintiffs, Ray and Lucy Nowakowski, appeal the entry of
summary judgment (735 ILCS 5/2--1005(c) (West 1994)) for
defendants, American Red Ball Transit Company, Inc. (Red Ball), and
Arrow Moving & Storage Company (Arrow), in a suit under the
Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud
Act)(815 ILCS 505/1 et seq. (West 1994)). The trial court ruled
that the suit was barred by the Carmack Amendment to the Interstate
Commerce Act (Carmack Amendment)(49 U.S.C.A. 11707 (West 1997)),
and by section 10b(1) of the Consumer Fraud Act (815 ILCS
505/10b(1)(West 1994)). On appeal, plaintiffs argue that neither
the Carmack Amendment nor section 10b(1) of the Consumer Fraud Act
bars a suit against an interstate motor carrier or its agent for
fraudulently depriving shippers of the benefit of insurance for
goods damaged in transit. We hold that, because this suit is in
substance one for loss from the carrier's damage to the shippers'
goods, it is preempted by the Carmack Amendment. Therefore, we
affirm.
Plaintiffs' complaint alleges the following facts. Red Ball
is a motor carrier engaged in interstate commerce. Plaintiffs
entered into a contract with Arrow, Red Ball's agent, to ship
plaintiffs' household goods from Gurnee, Illinois, to Sun Lakes,
Arizona. When the parties agreed to the contract, Arrow told
plaintiffs they could obtain extra insurance against breakage that
might occur during the move. Relying on this representation,
plaintiffs purchased extra insurance for $492.68. However, Red
Ball never obtained the extra insurance or furnished plaintiffs a
policy. Red Ball picked up the goods and delivered them to Sun
Lakes. When plaintiffs unpacked the items, they discovered $7,500
worth of breakage. Plaintiffs made a claim for this amount, but
Red Ball and Arrow denied the claim.
Plaintiffs alleged that Red Ball and Arrow committed statutory
consumer fraud. They relied in part on an Interstate Commerce
Commission regulation providing that, whenever a common carrier of
household goods sells insurance covering loss or damage in excess
of the carrier's specified liability and the carrier fails to
provide the shipper with the policy or other appropriate evidence
of the insurance purchased, the carrier shall be subject to full
liability for any claim. See 49 C.F.R. 1056.11(a)(1995).
Plaintiffs sought $7,500 actual damages and $30,000 punitive
damages. Each defendant then sought contribution or indemnity
against the other for any liability to plaintiffs.
In granting defendants' summary judgment, the court held that
the Carmack Amendment preempts the claims and that section 10b(1)
of the Consumer Fraud Act also exempts defendants from liability
under the state statute. Plaintiffs timely appealed.
Plaintiffs contend that the trial court erred in holding that
the Carmack Amendment preempts their claim for consumer fraud.
Plaintiffs concede that the federal statute preempts a state-law
cause of action for breach of contract to ship goods under a
receipt or bill of lading or for negligence in the delivery of
goods under such a contract. However, they assert that they are
suing for fraud in the procurement of insurance rather than loss
from improper shipping. Thus, they reason, their action under
Illinois law is consistent with the Carmack Amendment.
We disagree. The complaint does allege that defendants failed
to deliver insurance as promised. However, as plaintiffs do not
deny, the sole purpose for this insurance was to compensate them
for damage to the property the carrier delivered. In essence,
plaintiffs are suing an interstate motor carrier (and its agent)
for the carrier's negligent or improper handling of goods that the
carrier delivered in interstate commerce under a receipt or bill of
lading. This is precisely the type of liability for which the
Carmack Amendment was intended to provide uniform federal
standards, and it is well within the broad preemptive range of the
statute. Plaintiffs cannot evade the scope of the federal act by
denominating their cause of action as one for consumer fraud.
Courts have long recognized that, under the Carmack
Amendment's comprehensive regulation of carriers' liability,
"[a]lmost every detail of the subject is covered so completely that
there can be no rational doubt but that Congress intended to take
possession of the subject, and supersede all state regulation with
reference to it." Adams Express Co. v. Croninger, 226 U.S. 491,
505-06, 57 L. Ed. 314, 320, 33 S. Ct. 148, 152 (1913). The law's
preemptive force stems not only from its breadth but from its
purpose: to preserve uniform national guidelines for interstate
carriers' liability and thereby avoid the uncertainty that would
result from a multiplicity of state standards. Rini v. United Van
Lines, Inc., 104 F.3d 502, 504 (1st Cir. 1997); Moffit v. Bekins
Van Lines Co., 6 F.3d 305, 306-07 (5th Cir. 1993); Hughes v. United
Van Lines, Inc., 829 F.2d 1407, 1415 (7th Cir. 1987), cert. denied
485 U.S. 913, 99 L. Ed. 2d 248, 108 S. Ct. 1068 (1988);
Consolidated Rail Corp. v. Primary Industries Corp., 868 F. Supp. 566, 574 (S.D.N.Y. 1994).
Numerous courts have applied these principles in holding that
the Carmack Amendment preempts state-law based claims essentially
indistinguishable from the one here. In Rini, the plaintiff
obtained a jury verdict against a carrier that lost some of her
goods and refused to pay for the loss. The plaintiff recovered not
only under the Carmack Amendment but also under common-law theories
of negligence and misrepresentation and under the state statute
governing unfair and deceptive business acts.
The appellate court reversed, holding that all the state-law
claims upon which the plaintiff prevailed were preempted by the
Carmack Amendment. Observing that "the principal purpose of the
Amendment was to achieve national uniformity in the liability
assigned to carriers" (Rini, 104 F.3d at 504), the court reasoned
that the federal statute necessarily applied not only to the
transport of goods but the attendant claims process (Rini, 104 F.3d
at 505). Thus, the court reasoned, the touchstone inquiry in each
case is whether the carrier's liability is based on the loss of or
damage to the goods it shipped. To allow recovery under state law
where the ultimate harm is property damage or loss would ignore the
long-standing rule that state statutes are preempted if they in any
way enlarge the carrier's responsibility for the loss or at all
affect the ground or measure of recovery. Rini, 104 F.3d at 504-
05, relying on Charleston & Western Carolina Ry. Co. v. Varnville
Furniture Co., 237 U.S. 597, 603, 59 L. Ed. 1137, 1139, 35 S. Ct. 715, 716 (1915).
The Rini court concluded that the plaintiff's claims under
state law were preempted even though they were nominally premised
on the carrier's conduct during the claims process rather than
merely on the carrier's loss of her property. All these causes of
action stemmed from the loss of the plaintiff's goods; this was the
only injury she suffered. Rini, 104 F.3d at 506.
In Hughes, the plaintiffs' goods were damaged in transit by a
fire. The plaintiffs sued not only for negligence and breach of
contract but also for intentional and negligent misrepresentation
in providing coverage for damage. The court held that the Carmack
Amendment preempted all these claims, as the federal goals of
uniformity and certainty would be frustrated by allowing varying
and inconsistent state causes of action for harm caused in
interstate commerce. Hughes, 829 F.2d at 1412-15.
Pietro Cullotta Grapes, Ltd. v. Southern Pacific
Transportation Co., 917 F. Supp. 713 (E.D. Cal. 1996), involved
allegations of both property damage and business loss from untimely
shipments. The plaintiffs' state-law causes of action included
breach of contract, negligence, fraud, and negligent
misrepresentation; in part, they alleged that the defendants
wrongfully induced them to enter the contract by making crucial
representations that they knew were unlikely to be fulfilled. The
court held that the Carmack Amendment preempted all the state-law
causes of action for damage to the goods or delay in shipment of
the goods. The court refused to distinguish between actions based
solely on improper shipping and those based on carriers'
preshipment conduct, observing that several other courts had
repudiated such a distinction. See Cullotta, 917 F. Supp. at 715-
16 (and cases cited therein). Furthermore, the court reasoned that
to allow the plaintiffs' state-law claims would undercut the
certainty and uniformity that are the primary goals of the Carmack
Amendment's national system of carrier liability. Cullotta, 917 F. Supp. at 716.
In White v. United Van Lines Inc., 758 F. Supp. 1240 (N.D.
Ill. 1991), the plaintiff's goods were damaged in transit. Relying
in part on Hughes, the court held that the Carmack Amendment
preempted plaintiff's suit for fraudulent or bad-faith breach of an
insurance contract similar to the one here. As did Rini later,
White simply rejected the distinction plaintiffs here attempt to
draw between an action for damages to the goods themselves and one
for the carrier's improper conduct in processing a claim for
damages to the goods. White, 758 F. Supp. at 1243-44.
In Margetson v. United Van Lines, Inc., 785 F. Supp. 917
(D.N.M. 1991), the court held that the Carmack Amendment preempted
claims under state deceptive trade practices statutes even though
the plaintiff alleged not only that the carrier damaged her goods
but that it also deceived her about how it would store and
transport the goods. The court noted that, ultimately, the
plaintiff was seeking damages for the loss or injury incurred in
transporting her goods interstate. Margetson, 785 F. Supp. at 920.
The court also observed that allowing the plaintiff punitive
damages under the state statutes would be inconsistent with the
Carmack Amendment's limitation of carriers' liability to actual
damages. Margetson, 785 F. Supp. at 920-21; see also Cleveland v.
Beltman North American Co., 30 F.3d 373, 379 (2d Cir.
1994)(punitive damages are inconsistent with Carmack Amendment).
Other courts have recognized that the Carmack Amendment is
broad enough to preempt state-law claims for damages to goods
shipped interstate, even when these suits are styled as ones for
fraud or the violation of state consumer protection statutes. See
Schultz v. Auld, 848 F. Supp. 1497, 1502-03 (D. Idaho 1993)(shipper
alleged that carrier's representations about liability coverage
were fraudulent and violated state consumer practices statute);
United Van Lines, Inc. v. Shooster, 860 F. Supp. 826, 828-29 (S.D.
Fla. 1992)(holding Carmack Amendment preempts state-law claims for
fraud or deceptive trade practices, including defendants'
counterclaim alleging plaintiff fraudulently induced them to enter
into the contract).
Given this wealth of authority, we have no doubt that the
Carmack Amendment preempts plaintiffs' suit, which in essence seeks
compensation for the damage that defendants caused in transporting
plaintiffs' goods interstate. Plaintiffs suffered no other injury
and their theories of recovery are merely vehicles to obtain
compensation for this damage. Their claim must be adjudicated
according to the uniform federal standard of the Carmack Amendment,
for that standard provides the exclusive remedy where "the
substance of the action is ' "nothing more than an action for
damages against the delivering carrier." ' " Intech, Inc. v.
Consolidated Freightways, Inc., 836 F.2d 672, 677 (1st Cir. 1987),
quoting Georgia, Florida & Alabama Ry. Co. v. Blish Milling Co.,
241 U.S. 190, 197, 60 L. Ed. 948, 952, 36 S. Ct. 541, 544 (1916),
quoting Georgia, Florida & Alabama Ry. Co. v. Blish Milling Co., 15
Ga. App. 142, 147, 82 S.E. 784, 787 (1914).
Moreover, plaintiffs' invocation of a federal regulation
addressing the precise situation here is additional evidence that
Congress intended to supplant varying state remedies with a uniform
national standard for cases such as this one.
Because the Carmack Amendment wholly disposes of this case, we
need not consider whether section 10b(1) of the Consumer Fraud Act
also bars plaintiffs' action.
The judgment of the circuit court of Lake County is affirmed.
Affirmed.
GEIGER, P.J., and DOYLE, J., concur.