Custom Stud, Inc. v. Meadow Lark Agency, Inc.
- Donovan Frank
- 0:21-cv-00310
- U.S. District Court · District of Minnesota
- 11
In Custom Stud v. Meadow Lark, Judge Frank granted Meadow Lark’s motion and dismissed ASC’s counterclaims without prejudice because federal law preempted them.
Advanced Specialized Carriers, LLC’s counterclaims against Meadow Lark Agency, Inc. were dismissed without prejudice; the opinion did not dispose of Custom Stud, Inc.’s claims against Meadow Lark.
What happened
Custom Stud hired Meadow Lark to arrange transportation of equipment, and Meadow Lark hired Advanced Specialized Carriers, or ASC, to carry it. ASC alleged that the load was misdescribed, that part of it fell from the trailer, and that Meadow Lark owed more than $50,000 in transportation and storage charges. ASC brought counterclaims for an unpaid account, breach of contract and the duty of good faith, and misrepresentation.
In Custom Stud, Inc. v. Meadow Lark Agency, Inc., the court considered Meadow Lark’s motion to dismiss ASC’s counterclaims. The court held that all three counterclaims were connected to Meadow Lark’s services as a transportation broker and were state-law claims seeking economic relief. Because the Federal Aviation Administration Authorization Act preempted those claims, the court did not consider Meadow Lark’s other arguments.
Judge Donovan W. Frank granted Meadow Lark’s motion to dismiss. The court ruled that ASC’s counterclaims were preempted and dismissed ASC’s amended counterclaim without prejudice. The court noted that ASC might have a breach-of-contract claim if it could separate that claim from the preempted allegations about the duty of good faith and fair dealing.
The detailed version
- Custom Stud, Inc. v. Meadow Lark Agency, Inc. · No. 0:21-cv-00310
- Donovan Frank
- Oct. 13, 2021
Background
Custom Stud contracted with Meadow Lark Agency, Inc. to transport equipment from Minnesota to Alabama. Meadow Lark hired Advanced Specialized Carriers, LLC (ASC), a motor carrier, under a Broker/Motor Carrier Agreement. The order described the shipment as a 42,000-pound load of coils requiring a 53-foot flatbed and an 8-foot tarp.
According to ASC’s amended counterclaims, the actual load consisted of bulky equipment and crates that weighed substantially more than the order specified. ASC alleged that Meadow Lark did not correct the problem after ASC raised it, that the load could not be tarped as specified, and that a piece of equipment fell from the trailer. ASC paid towing and storage costs and kept the fallen equipment at its Louisiana yard. ASC alleged that it sent Meadow Lark invoices from 2015 through 2020 totaling more than $50,000, and that Meadow Lark did not pay them or generally object to them.
Meadow Lark had filed third-party claims against ASC concerning Custom Stud’s claims for damage to the equipment. ASC asserted three counterclaims against Meadow Lark: an account-stated claim based on alleged assent to storage charges, a claim for breach of contract and the implied duty of good faith and fair dealing, and a misrepresentation claim.
Motion and legal standard
Meadow Lark moved to dismiss ASC’s counterclaims under Rule 12(b)(6), which permits dismissal when a pleading does not state a legally sufficient claim. Meadow Lark argued that the claims were preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA), 49 U.S.C. § 14501(c)(1), and were not supported by ASC’s factual allegations. Meadow Lark also argued that the account-stated claim was governed by the parties’ written agreement.
On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and draws reasonable inferences for the claimant, but it does not accept wholly conclusory allegations or legal conclusions. A pleading must contain enough facts to make a claim plausible rather than merely speculative.
Preemption analysis
The FAAAA preempts state laws related to a price, route, or service of a motor carrier, broker, or freight forwarder concerning transportation of property, unless the connection is too remote or peripheral. The court explained that the statute does not preempt a breach-of-contract claim limited to enforcing the parties’ own agreement. However, an implied duty of good faith and fair dealing can be preempted when it is a state-imposed obligation that the parties cannot contract around.
The court found that all three of ASC’s counterclaims arose from Meadow Lark’s services as a transportation broker. The account-stated claim concerned storage of property connected to the transportation agreement. The contract and good-faith claim concerned the information Meadow Lark allegedly provided before the shipment and its alleged failure to remedy the loading problem. The misrepresentation claim likewise concerned the nature and weight of the goods and the resulting storage of part of the load.
The court rejected ASC’s argument that preemption did not apply because ASC sought damages separate from transportation rates or damage to goods in transit. It found a sufficient connection between the claims and Meadow Lark’s brokerage services. The claims were purely economic and did not involve safety regulations that would avoid preemption.
The court also held that the good-faith portion of Counterclaim II was preempted because Montana law, which governed the parties’ relationship, codifies the duty of good faith and fair dealing. The court declined to separate any independent breach-of-contract claim from the allegations concerning that duty at that stage, but stated that ASC might be able to clarify and pursue a legitimate breach-of-contract claim.
Disposition
Judge Donovan W. Frank granted Meadow Lark’s Motion to Dismiss. The order stated that ASC’s counterclaims were preempted by the FAAAA and that ASC’s amended counterclaim against Meadow Lark was dismissed without prejudice. The court did not reach Meadow Lark’s other dismissal arguments.
Read the full 11-page opinion on CourtListener, the free public archive maintained by the Free Law Project.