Opinion ID: 2768633
Heading Depth: 2
Heading Rank: 2

Heading: Preemption of Canadian Pacific’s Breach-of-

Text: Contract Claims Canadian Pacific’s breach-of-contract claims also should have survived the motions to dismiss. As noted earlier, the railroad argues that both Knoedler and Durham breached their contractual obligations to supply GE with LIAcompliant seats. Claiming the status of a third-party beneficiary to those contracts, Canadian Pacific seeks relief for those breaches. Much of the analysis described above with respect to the indemnification and contribution claims also applies to the breach-of-contract claims. Just as there is room for state tort remedies, there is room for state contract remedies associated with the federal standards embodied in the LIA. The breach-of-contract claims do not require Knoedler or Durham to comply with a state duty or standard of care. Instead, Canadian Pacific seeks to enforce contractual provisions that call for compliance with federal law. Enforcing the contracts would therefore not detrimentally affect national uniformity of railroad operating standards. Uniformity is to be expected because it is in the interest of the contracting parties. Having one set of national regulations to follow is important both to railroads and to equipment suppliers for the obvious reason that neither wants to deal with a multiplicity of possibly conflicting state standards. Therefore, in delineating their duties under a contract, the railroads and their suppliers will be fully motivated to ensure 23 that all provisions regarding equipment design and manufacture are based on a uniform federal standard of care. But even if the LIA did preempt Canadian Pacific’s indemnification and contribution claims, it would not follow that the LIA preempts the breach-of-contract claims, because breach-of-contract claims involve voluntarily assumed duties as opposed to duties imposed by state law.17 “[W]hen a party to a contract voluntarily assumes an obligation to proceed under certain state laws, traditional preemption doctrine does not apply to shield a party from liability for breach of that 17 Knoedler argues that Canadian Pacific is impermissibly attempting to circumvent the absence of a private right of action in the LIA by restating its tort claims as breach-of-contract claims. Knoedler relies on Astra USA, Inc. v. Santa Clara County, in which the Supreme Court held that plaintiffs could not sue on a form contract implementing a statute when the statute itself provided no private right of action. 131 S. Ct. 1342, 1345 (2011) (applying § 340B of the Public Health Services Act, which imposes ceilings on prices drug manufacturers may charge for medications sold to healthcare facilities). But, as discussed above, the Supreme Court in Crane allowed enforcement of the SAAs through state-law claims even when there was no private right of action. See supra pp. 10-12 (discussing Crane and the SAAs). Furthermore, Astra is distinguishable as it involved “form agreements” that “simply incorporate[d] statutory obligations and record[ed] the manufacturers’ agreement to abide by them” but “contain[ed] no negotiable terms.” Id. at 1348. Here, the contracts at issue involved negotiated duties voluntarily assumed by the parties that, Canadian Pacific alleges, explicitly required LIA-compliant seats. 24 agreement.” Epps v. JP Morgan Chase Bank, N.A., 675 F.3d 315, 326 (4th Cir. 2012). There is a salutary “you’ve made your own bed, now lie in it” quality to several cases from the Supreme Court that emphasize the importance of voluntarily assumed contractual obligations. See Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 228 (1995) (“We do not read the [Airline Deregulation Act]’s preemption clause … to shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline’s alleged breach of its own, self-imposed undertakings.”); Cipollone, 505 U.S. at 526 (plurality opinion) (holding that a breach-of-warranty claim was not preempted by the Federal Cigarette Labeling and Advertising Act because “a commonlaw remedy for a contractual commitment voluntarily undertaken should not be regarded as a requirement … imposed under State law” (alteration in original) (internal quotation marks omitted)); see also Nw., Inc. v. Ginsberg, 134 S. Ct. 1422, 1432-33 (2014) (holding that the Airline Deregulation Act preempted claims alleging breach of an implied covenant because, under the controlling state law, parties could not contract out of such covenants – and thus they were “regarded as state-imposed” – but noting that if a state permitted parties to voluntarily surrender protections from covenants, then those claims would “escape preemption”). That some of those cases involved express preemption as opposed to field preemption does not change the analysis. The same principle applies, regardless of the breadth of preemption: duties voluntarily undertaken cannot be considered as “state imposed.” Because Kurns concluded only that “state common-law duties and standards of care” are preempted by the LIA, Kurns, 132 S. Ct. at 1269, – and not 25 voluntary contractual duties – even the broad field preemption of the LIA does not rule out Canadian Pacific’s breach-of-contract claims.18 To hold that the LIA preempts all breach-of-contract claims would allow, and perhaps encourage, manufacturers to make grand contractual promises to obtain a deal and then breach their duties with impunity. Knoedler’s and Durham’s only response to the perverse incentives inherent in their arguments is a shoulder shrug. “Let the market sort things out,” they say. As counsel for Durham put it at oral argument, “the people who are being put upon by this lack of remedy are not your average consumers; they are railroads, in this case a huge railroad, with incredible economic power to buy or not buy from various people.” (Oral Arg. at 23:2543.) But even the rich and powerful are entitled to the rule of law, and we see no reason to believe that Congress meant for Darwinian attrition to replace legal remedies. 18 The District Court erroneously relied on cases holding that breach-of-contract claims were preempted under the Carmack Amendment. The Carmack Amendment is a comprehensive federal regulatory scheme pertaining to interstate carrier liability for loss or damage to shipments. Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc., 762 F.3d 332, 334 (3d Cir. 2014) (“Congress first comprehensively addressed interstate carrier liability in the Carmack Amendment … .”). Those cases are readily distinguishable because, unlike the LIA, the Carmack Amendment provides a federal private right of action. Id. (“Shippers may bring a federal private cause of action directly under the Carmack Amendment against a carrier for damages.”). 26