Delaware & Hudson Railway Co. v. Knoedler Manufacturers, Inc.

781 F.3d 656, 39 I.E.R. Cas. (BNA) 959, 2015 WL 127374, 2015 U.S. App. LEXIS 385
CourtCourt of Appeals for the Third Circuit
DecidedJanuary 9, 2015
Docket13-3678
StatusPublished
Cited by22 cases

This text of 781 F.3d 656 (Delaware & Hudson Railway Co. v. Knoedler Manufacturers, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Delaware & Hudson Railway Co. v. Knoedler Manufacturers, Inc., 781 F.3d 656, 39 I.E.R. Cas. (BNA) 959, 2015 WL 127374, 2015 U.S. App. LEXIS 385 (3d Cir. 2015).

Opinions

OPINION OF THE COURT

JORDAN, Circuit Judge.

This case requires us to determine the scope of federal preemption under the Locomotive Inspection Act (“LIA”), 49 U.S.C. § 20701. Appellant Delaware & Hudson Railway Company, Inc., doing business as Canadian Pacific Railway, and its subsidiaries (collectively, with the parent company, “Canadian Pacific”) settled lawsuits brought by its employees who had suffered injuries as a result of defective train seats. Canadian Pacific then brought indemnification, contribution, and breach-of-contract claims against Knoedler Manufacturing, Inc. (“Knoedler”), which supplied the seats, and Durham Industrial Sales, Inc. (“Durham”), which tried unsuccessfully to repair the seats. Upon motions filed by Knoedler and Durham (collectively the “Appellees”), the United States District Court for the Western District of Pennsylvania dismissed Canadian Pacific’s claims, holding that they were preempted by the LIA. We disagree and will vacate the District Court’s orders of dismissal and remand for further proceedings.

I. Background

A. Statutory and Regulatory Background

The LIA provides that “a locomotive ... and its parts and appurtenances” must be “in proper condition and safe to operate without unnecessary danger of personal injury.”1 49 U.S.C. § 20701(1). Pursuant to the LIA, the Federal Railroad Administration, which acts under the authority of the Secretary of Transportation, 49 U.S.C. [659]*659§ 103(a), has promulgated regulations on the governing standards of care for locomotive equipment, including seats, 49 C.F.R. § 229.119(a) (requiring locomotive seats to “be securely mounted and braced”).

While the LIA and its regulations provide binding standards for the suppliers of locomotives and locomotive equipment, as well as for railroad companies, 49 U.S.C. § 21302(a)(1); 49 C.F.R. § 229.7(b), the statute does not provide a private right of action to employees injured by defective equipment. Urie v. Thompson, 337 U.S. 163, 188-89, 69 S.Ct. 1018, 93 L.Ed. 1282 (1949). Instead, an injured employee must bring an action against his employer under the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. § 51 et seq. The LIA supplements the FELA “by imposing on interstate railroads an absolute and continuing duty to provide safe equipment” and has the “purpose and effect of facilitating employee recover[y].” Urie, 337 U.S. at 188-89, 69 S.Ct. 1018 (citation and internal quotation marks omitted).

Once an employer has been found liable in a FELA action, “it accords, with the FELA’s overarching purpose to require the employer to bear the burden of identifying other responsible parties and demonstrating that some of the costs of the injury should be spread to them.” Norfolk & W. Ry. Co. v. Ayers, 538 U.S. 135, 165, 123 S.Ct. 1210, 155 L.Ed.2d 261 (2003); see also Ellison v. Shell Oil Co., 882 F.2d 349, 353 (9th Cir.1989) (“FELA’s purpose of providing recovery for injured workers is not defeated by permitting an employer to recoup its losses in part or in full from a third party, when the circumstances and state law permit.”).

B. Factual History2

General Electric (“GE”) built and maintained the locomotives at issue in this case, under a contract it had with Canadian Pacific. Pursuant to that agreement, Canadian Pacific directed GE to install seats purchased from Knoedler. GE complied, and Knoedler “agreed to provide seats of suitable quality to prevent seat failures, and suitable for use in Canadian Pacific’s locomotives, in the future.” (App. at 50.)

In the late 1990s and early 2000s, GE and Canadian Pacific became aware of problems with seat safety and identified defects that were causing the seats to break. GE discussed the nature of the defects and the repair process with Knoe-dler but grew concerned that Knoedler would be unable to make the necessary .repairs. To allay that concern, Knoedler introduced GE to Durham and “promised that Durham had the expertise and capacity to repair the seats on Knoedler’s behalf.” (Appellant’s Opening Br. at 6-7.)

GE and Durham subsequently entered. into a contract under which “Durham agreed to refurbish the Knoedler Seats in such a way as to prevent future seat failures.” (App. at 51.) Despite those repair efforts, the seats continued to break and, as a consequence, four Canadian Pacific employees were injured. The railroad eventually settled with its employees for a total of approximately $2.7 million. Thereafter, it sought to recoup its losses from Knoedler and Durham.

[660]*660 C. Procedural History

Canadian Pacific filed this action against Knoedler and Durham on December 16, 2011, asserting claims for indemnification, contribution, breach of contract (with Canadian Pacific claiming the rights of a third-party beneficiary), product liability, and negligence under Pennsylvania law. On March 9, 2012, Knoedler filed a motion to dismiss the complaint. In response, the • railroad filed its First Amended Complaint on March 30, 2012,. reasserting the same claims but clarifying that the claims were based on the Appellees’ violations of the LIA and their breach of contractual promises to provide LIA-compliant seats.3 Shortly thereafter, Durham and Knoedler filed their motions to dismiss the First Amended Complaint.

On February 12, 2013, the District Court issued an Order and Memorandum Opinion dismissing Canadian Pacific’s indemnification and contribution claims with prejudice,4 concluding that they were preempted by the LIA. The Court also dismissed the breach-of-contract claims, saying that the company had not adequately pled its status as a third-party beneficiary. The Court did, however, allow Canadian Pacific to amend its contract claims, and it did so, providing additional details about its standing as a third-party beneficiary of the contracts. On August 1, 2013, the Court issued a second Order and Memorandum Opinion dismissing the breach-of-contract claims, concluding that they were also preempted under the LIA. Canadian Pacific timely appealed both of the District Court’s Orders.

II. Discussion5

Canadian Pacific raises two arguments on appeal: first, that its indemnification and contribution claims are not preempted by the LIA because they are premised on a violation of federal standards set by the LIA and accompanying regulations, and, second, that its breach-of-contract claims are not preempted by the LIA because they are premised on a violation of express contractual duties. We address those arguments in turn.

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Bluebook (online)
781 F.3d 656, 39 I.E.R. Cas. (BNA) 959, 2015 WL 127374, 2015 U.S. App. LEXIS 385, Counsel Stack Legal Research, https://law.counselstack.com/opinion/delaware-hudson-railway-co-v-knoedler-manufacturers-inc-ca3-2015.