NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3850-18T3
MERCEDES-BENZ USA, LLC,
Plaintiff-Appellant,
v.
NIPPON YUSEN KABUSHIKI KAISHA, NYK LINE (NORTH AMERICA) INC., NYK BULKSHIP (USA) INC., MITSUI O.S.K. LINES, LTD., MITSUI O.S.K. BULK SHIPPING (USA) LLC, KAWASAKI KISEN KAISHA, LTD., and "K" LINE AMERICA, INC.,
Defendants,
and
WALLENIUS WILHELMSEN LOGISTICS AS a/k/a WALLENIUS WILHELMSEN OCEAN AS, and WALLENIUS WILHELMSEN LOGISTICS AMERICAS, LLC
Defendants-Respondents. _______________________________ Argued telephonically April 22, 2020 – Decided August 10, 2020
Before Judges Koblitz, Gooden Brown and Mawla.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6325-18.
Ethan Glass (Quinn Emanuel Urquhart & Sullivan, LLP) of the District of Columbia bar, admitted pro hac vice, argued the cause for appellant (Archer & Greiner, PC, and Ethan Glass (Quinn Emanuel Urquhart & Sullivan, LLP) of the District of Columbia bar, admitted pro hac vice, attorneys; Thomas J. Herten, Nicole G. McDonough, and Ethan Glass, on the brief).
Roberto A. Rivera-Soto argued the cause for respondents Wallenius Wilhelmsen Logistics AS a/k/a Wallenius Wilhelmsen Ocean AS, and Wallenius Wilhelmsen Logistics Americas, LLC (Ballard Spahr LLP, attorneys; Roberto A. Rivera-Soto, of counsel and on the brief).
PER CURIAM
We consider a question of federal preemption of state antitrust, tort and
contract claims, by the federal Shipping Act of 1984, 46 U.S.C. §§ 40101 to
41309. Plaintiff Mercedes-Benz USA filed suit against defendants Wallenius
Wilhelmsen Logistics AS a/k/a Wallenius Wilhelmsen Ocean AS, and
A-3850-18T3 2 Wallenius Wilhelmsen Logistics Americas, LLC (WWL) and others 1 in state
court alleging violations of the New Jersey Antitrust Act, N.J.S.A. 56:9-1 to -19,
tortious interference, breach of contract and breach of the implied covenant of
good faith and fair dealing. Before this suit was filed, a federal court dismissed a
class action seeking relief under the Clayton Act, 15 U.S.C. § 15, for violations of
the Sherman Act, 15 U.S.C. § 1, as well as state antitrust, consumer protection and
unjust enrichment claims, and the Third Circuit later affirmed. In re Vehicle
Carrier Servs. Antitrust Litig., 846 F.3d 71, 78 (3d. Cir. 2017). In its March 29,
2019 order, the trial court also dismissed plaintiff's claims with prejudice, agreeing
with the Third Circuit's reasoning that the Shipping Act preempted all state claims.
We now affirm.
I. Factual Background.
Beginning in 1997, plaintiff purchased roll-on, roll-off (RO-RO) services
from defendants, non-U.S.-flagged vessels within the jurisdiction of the United
States, to ship new Mercedes-Benz automobiles to and from the United States. In
September 2012, plaintiff became aware that defendants were engaged in an illegal
1 Nippon Yusen Kabushiki Kaisha, NYK Line (North America) Inc. and NYK Bulkship (USA) Inc. have resolved their issues with plaintiff and are not participating in this appeal. Defendants Mitsui O.S.K. Lines, Ltd., Mitsui O.S.K. Bulk Shipping (USA) LLC, Kawasaki Kisen Kaisha, Ltd., and "K" Line America, Inc. were also dismissed from this appeal. A-3850-18T3 3 price-fixing agreement after media outlets reported a raid of defendants' offices by
antitrust authorities from the United States, European Union and Japan in
connection with ongoing criminal investigations. As they admitted later,
defendants were engaged in this price-fixing agreement during their years
servicing plaintiff's contract. WWL eventually admitted to its illegal conduct,
entering a guilty plea in federal court in 2016 and agreeing to pay 98.9 million
dollars in fines. The same year WWL also agreed to pay 1.5 million dollars to the
Federal Maritime Commission (FMC).
Direct purchasers of RO-RO shipping services filed a class action suit
against defendants in July 2013, asserting federal antitrust claims under Section 1
of the Sherman Act, 15 U.S.C. § 1, as well as state antitrust claims and claims for
consumer fraud and unjust enrichment. Vehicle Carrier, 846 F.3d at 77-78. The
complaint was amended following the consolidation of the direct purchasers' class
with the indirect purchasers' class. The amended complaint defined the putative
class as "[a]ll persons and entities that purchased [v]ehicle [c]arrier [s]ervices for
shipments to or from the United States directly from any of the [d]efendants or any
current or former predecessor, subsidiary or affiliate of each, at any time during the
period from January 1, 2000 to December 31, 2012."
A-3850-18T3 4 In August 2015, the District Court dismissed the direct purchasers' amended
complaint. The Third Circuit affirmed the dismissal, finding the Shipping Act
preempted both federal and state court action. Ibid. The Supreme Court denied
certiorari. Alban v. Nippon Yusen Kabushiki Kaisha, et al., ___ U.S. ___, 138 S.
Ct. 114 (2017).
On August 30, 2018, plaintiff filed a complaint against defendants in the
New Jersey Superior Court, alleging violations of the New Jersey Antitrust Act,
breach of contract, breach of the implied covenant of good faith and fair dealing,
and tortious interference. Defendants removed the case to the District Court,
which in turn remanded it to the Superior Court.
II. Standard of Review.
As with questions of law in general, Mejia v. Quest Diagnostics, Inc., 241
N.J. 360, 370-71 (2020), we review issues of federal preemption de novo. In re
Reglan Litig., 226 N.J. 315, 327 (2016). "The doctrine of federal preemption finds
its source in the Supremacy Clause of the United States Constitution." Id. at 328.
"The party claiming preemption bears the burden of supporting that claim by 'clear
and manifest evidence.'" Franklin Tower One, L.L.C. v. N.M., 157 N.J. 602, 615
(1999) (quoting Pa. Med. Soc'y v. Marconis, 942 F.2d 842, 853 (3d. Cir. 1991)).
A-3850-18T3 5 "[Preemption] may be either express or implied." In re Reglan Litig., 226
N.J. at 328 (quoting Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98
(1992)). Preemption may be implied "where the federal legislation is so
comprehensive that it creates the inference that Congress intended to leave no
room for state regulation in the area." Franklin, 157 N.J. at 615. Alternatively,
conflict preemption is applied "where a state law 'stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Congress.'" Id. at 616 (quoting Mich. Canners & Freezers Ass'n v. Agric. Mktg. &
Bargaining Bd., 467 U.S. 461, 470 (1984)).
III. The Shipping Act of 1984.
The Shipping Act of 1984 was intended to:
(1) establish a nondiscriminatory regulatory process for the common carriage of goods by water in the foreign commerce of the United States with a minimum of government intervention and regulatory costs;
(2) provide an efficient and economic transportation system in the ocean commerce of the United States that is, insofar as possible, in harmony with, and responsive to, international shipping practices;
(3) encourage the development of an economically sound and efficient liner fleet of vessels of the United States capable of meeting national security needs; and
(4) promote the growth and development of United States exports through competitive and efficient ocean
A-3850-18T3 6 transportation and by placing a greater reliance on the marketplace.
[46 U.S.C. § 40101.]
Section 40302 of the Shipping Act requires that "every agreement referred to
in section 40301(a) . . . of this title shall be filed with the [FMC]." 46 U.S.C.
§ 40302.
Ocean common carrier agreements that must be filed with the FMC are
those that:
(1) discuss, fix, or regulate transportation rates, including through rates, cargo space accommodations, and other conditions of service;
(2) pool or apportion traffic, revenues, earnings, or losses;
(3) allot ports or regulate the number and character of voyages between ports;
(4) regulate the volume or character of cargo or passenger traffic to be carried;
(5) engage in an exclusive, preferential, or cooperative working arrangement between themselves or with a marine terminal operator;
(6) control, regulate, or prevent competition in international ocean transportation; or
(7) discuss and agree on any matter related to a service contract.
A-3850-18T3 7 [46 U.S.C. § 40301(a).]
An agreement between or among ocean common carriers may not "prohibit
or restrict a member of the agreement from engaging in negotiations for a service
contract with a shipper"; "require a member of the agreement to disclose a
negotiation on a service contract, or the terms of a service contract, other than
those terms required to be published under section 40502(d) of this title"; or "adopt
mandatory rules or requirements affecting the right of an agreement member to
negotiate and enter into a service contract." 46 U.S.C. § 40303(a)(1).
Once an agreement has been filed with the FMC and becomes effective, the
carriers are subject to regulation by the FMC and receive exemption from antitrust
laws. 46 U.S.C. § 40307. The Act defines "antitrust laws" as the following federal
statutes: the Sherman Act, 15 U.S.C. §§ 1 to 7; the Wilson Tariff Act, 15 U.S.C. §§
8, 9; the Clayton Act, 15 U.S.C. §§ 12 to 27; the Act of June 19, 1936, 15 U.S.C.
§§ 13, 13(a), 13(b) and 21(a); the Federal Trade Commission Act, 15 U.S.C. §§ 41
to 58; and the Antitrust Civil Process Act, 15 U.S.C. §§ 1311 to 1314; as well as
"[a]cts supplementary to those [a]cts." 46 U.S.C. § 40102(2).
As to unfiled agreements, the Shipping Act provides:
A person may not operate under an agreement required to be filed under section 40302 or 40305 of this title if —
A-3850-18T3 8 (1) the agreement has not become effective under section 40304 of this title or has been rejected, disapproved, or canceled; or
(2) the operation is not in accordance with the terms of the agreement or any modifications to the agreement made by the [FMC].
[46 U.S.C. § 41102(b).]
These unfiled agreements may result in criminal sanctions, Vehicle Carrier,
846 F.3d at 85, but are also immune from antitrust litigation insofar as 46 U.S.C.
§ 40307(d) states: "A person may not recover damages under section 4 of the
Clayton Act (15 U.S.C. [§] 15), or obtain injunctive relief under section 16 of that
Act (15 U.S.C. [§] 26), for conduct prohibited by this part [46 U.S.C. §§ 40101 to
41309]." Thus, plaintiff could not sue in federal court for damages due to the
unfiled illegal agreement of defendants.
IV. Preemption.
Plaintiff argues that the court improperly relied on the Third Circuit Vehicle
Carrier decision. Plaintiff asserts its state "claims do not pose an obstacle to the
accomplishment of the purpose of the Act." It bases this conclusion on three
points: A) the joint opinion of the FMC and United States Antitrust Division; B)
"the simple fact that the Shipping Act and New Jersey law coexist"; and C) the
A-3850-18T3 9 Shipping Act's textual reference to federal statutes only and the legislative history,
which does not mention state antitrust, tort, or contract claims.
A. Federal Agency Input.
Plaintiff argues that we should afford "substantial deference" to the analysis
provided by the FMC and the United States Antitrust Division in their joint amici
brief submitted to the Third Circuit in Vehicle Carrier. "The FMC's view, which
United States shares, is that damages claims under state antitrust law challenging
unfiled price-fixing agreements between carriers would not contravene the
purposes of the Shipping Act, negatively affect the FMC's enforcement of the
Shipping Act,[2] or otherwise frustrate its administration of that Act." The FMC
2 The Shipping Act authorizes the FMC to both investigate violations of the statute either by complaint or on its own motion and hold proceedings for private enforcement. 46 U.S.C. §§ 41301, 41302(a). In all, according to the Supreme Court, "the similarities between FMC proceedings and civil litigation are overwhelming." Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 759 (2002). Where reparations are appropriate, the FMC may, depending on the violation, award up to double the amount required to compensate for the injury, 46 U.S.C. § 41305(b) to (c), prejudgment interest, 46 C.F.R. § 502.253, and reasonable attorney fees, 46 C.F.R. § 502.254. The Shipping Act limits an award of "reparations" for an injury caused by a violation of the statute to complaints filed within three years from the date the relevant claim accrues, 46 U.S.C. § 41301(a), and the regulations echo that limitation, 46 C.F.R. § 502.62(a)(4)(iii). Many other plaintiffs filed claims before the FMC from 2015 to 2017, nearly all of which were deemed time barred. A-3850-18T3 10 and United States submitted the following statement regarding the indirect
purchasers' claims under state antitrust laws:
State antitrust law has traditionally operated alongside its federal counterpart, see California v. ARC Am. Corp., 490 U.S. 93, 101 n.4 (1989) (noting that "[twenty-one] states had already adopted their own antitrust laws" when the Sherman Act was enacted); 14 Areeda & Hovenkamp, Antitrust Law ¶ 2401(a). Congress is presumed to have been aware of this background when it passed the Shipping Act. Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184-85 (1988) ("We generally presume that Congress is knowledgeable about existing law pertinent to the legislation it enacts."). It can be inferred, then, that Congress intended for state law to complement the government's criminal prosecutions and civil penalties imposed on ocean carriers that operate under price-fixing agreements that are not exempted by the Shipping Act.
The Third Circuit in Vehicle Carrier declined to defer to the position of
amici, stating:
Finally, the FMC's and United States' position on conflict preemption is not "persuasive[]." See [Wyeth v. Levine, 555 U.S. 555, 577 (2009)]. We recognize, as they assert, that the Shipping Act and its legislative history are silent regarding state law claims. However, the position that the Shipping Act contemplates state law antitrust enforcement is inconsistent with the conclusion that the Shipping Act bars Clayton Act claims (with which amici agree); it also overlooks the purposes of the Act as set forth in the statute and legislative history as well as the comprehensive scheme for enforcement of Shipping Act violations before the FMC.
A-3850-18T3 11 [846 F.3d at 86 n.17.]
We are undisputedly not bound by the Third Circuit decision. Dewey v.
R.J. Reynolds Tobacco Co., 121 N.J. 69, 79-80 (1990). At most, the Third
Circuit decision constitutes persuasive authority. State v. Diorio, 216 N.J.
598, 615 (2014). But the statute does provide for immunity from federal
antitrust laws for agreements filed with the FMC, and immunity from the
Clayton Act for unfiled illegal agreements. Its legislative history confirms that
an FMC proceeding was meant to be the exclusive federal remedy for those
violations. Seawinds Ltd. v. Nedlloyd Lines, B.V., 80 B.R. 181, 184 (N.D.
Cal. 1987), aff'd o.b., 846 F.2d 586 (9th Cir. 1988). 3
We do not owe federal agencies any greater deference than do federal
courts, see N.J. Hospice & Palliative Care Org. v. Guhl, 414 N.J. Super. 42,
52-53 (App. Div. 2010) (requiring deference, but only to the same level as
federal courts), and the Third Circuit did not defer to the amici. As a general
rule, while regulations and other formal agency actions are afforded
considerable deference, more informal statutory interpretations, such as
reflected in the amici legal brief, are given lesser deference and then only to
3 In Seawinds, the District Court dismissed a complaint entailing both federal antitrust and pendent state common law claims on preemption grounds, although it never explicitly held that the Shipping Act preempted the state claims along with the federal ones. Id. at 182-83, 189-90. A-3850-18T3 12 the extent they are persuasive—that is, depending on the "thoroughness
evident in [the agency's] consideration, the validity of its reasoning, its
consistency with earlier and later pronouncements, and all those factors which
give it the power to persuade." Nutley Policemen's Benevolent Ass'n Local
#33 v. Twp. of Nutley, 419 N.J. Super. 160, 167-68 (App. Div. 2011)
(alteration in original) (quoting Big M, Inc. v. Tx. Roadhouse Holding, LLC,
415 N.J. Super. 130, 136 (App. Div. 2010)).
No deference is due to an agency's ultimate legal conclusion, whether
formal or informal, with regard to matters of federal preemption. Farina v.
Nokia Inc., 625 F.3d 97, 126 (3d Cir. 2010). Neither the FMC nor United States
submitted its position to us, nor must we defer to a federal agency, especially when
the federal courts have chosen not to do so. That said, we perceive the agencies to
be focused primarily on stricter enforcement measures rather than enhancing the
Shipping Act's intended aims of reducing complex restrictions imposed on
shipping in and out of the United States, including "provid[ing] an efficient and
economic transportation system in the ocean commerce of the United States that is,
insofar as possible, in harmony with, and responsive to, international shipping
practices." 46 U.S.C. § 40101(2).
In their brief amici commented colorfully:
A-3850-18T3 13 Congress did not intend to protect ocean carriers operating under unfiled and ineffective agreements. To the contrary, it determined that regulation by only the FMC would be insufficient to deter and punish those who chose to collude covertly. The Shipping Act, therefore, contemplates robust enforcement of the antitrust laws against those companies and individuals, like many of the ocean carriers here, who enter into secret agreements, including the imposition of substantial criminal fines against ocean carriers and imprisonment of their culpable executives. . . . Additional antitrust scrutiny of unfiled agreements, in the form of damages claims under state law, is perfectly consistent with this robust enforcement. Under Congress’s scheme, ocean carriers that covertly violate the antitrust laws can be thrown into the briny deep. This scheme is not frustrated by the possibility that sharks also swim in those waters.
Defendants have suffered severe economic sanctions. The issue before us is
whether additional state litigation is permitted. The Shipping Act's aim of
avoiding further restrictions and regulations on ocean transport is not furthered by
allowing state litigation in all those states touched by international shipping.
B. No Direct Conflict Between State Claims and the Shipping Act.
Plaintiff argues that United States Supreme Court precedent "allows federal-
state parallel enforcement of the antitrust laws," as does New Jersey law, which
permits the state to "impose additional penalties for the same conduct that is
prohibited under federal law." Plaintiff cites to California v. ARC America Corp.,
490 U.S. 93, 102 (1989), where the Supreme Court found that a state law
A-3850-18T3 14 permitting indirect purchaser recoveries was "consistent with the broad purpose of
the federal antitrust laws: deterring anticompetitive conduct and ensuring the
compensation of victims of that conduct."
Plaintiff asserts that the "conspiracy among [d]efendants directly impacted
and restricted negotiations involving [p]laintiff's service contracts." Plaintiff cites
to In re Reglan Litigation, where our Supreme Court found that federal law did not
preempt the plaintiff's state law failure-to-warn claims regarding an allegedly
inadequate prescription drug label. 226 N.J. at 343–44. In making this finding, the
Court reasoned that the defendants "did not have to violate federal law to comply
with state law. . . . [I]t [was] not impossible to comply with both federal and state
law." Id. at 336. Plaintiff asserts that the same reasoning applies here because "the
obligations imposed by New Jersey law run 'parallel to' and 'promote' federal
policies and obligations; they do not work against them." Plaintiff argues that both
the Shipping Act and state contract, tort, and antitrust laws prohibit defendants'
conduct, and thus, compliance with federal and state law is not impossible.
State litigation is consistent with the federal aims insofar as, if successful,
plaintiff would extract additional civil penalties from defendants. No conflict
exists between federal and state requirements.
C. The Text and Legislative History of the Shipping Act.
A-3850-18T3 15 Plaintiff cites to two provisions of the Shipping Act, 46 U.S.C. § 40307(a)
and (d), that "expressly preempt federal, civil antitrust claims," but do not
reference state law claims. The Shipping Act does not mention state antitrust
statutes nor other state claims.
Plaintiff asserts that Congress' failure to include language in the Shipping
Act preempting state claims "confirms that the Act was not intended to preempt
state antitrust claims." Plaintiff also cites to the Supreme Court's decision in
Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 376 (1958), for the proposition
that when one or more items within a class are expressly included in a definition,
all that are not enumerated are deemed to be excluded.
Plaintiff argues further that even if we determine that the text of the
Shipping Act is ambiguous, the legislative history supports a finding that Congress
did not intend for the Act to preempt state antitrust claims. While the legislative
history does not specifically mention state antitrust claims, it does "demonstrate
Congress's intent to create a comprehensive, predictable federal framework to
ensure efficient and nondiscriminatory international shipping practices." Vehicle
Carrier, 846 F.3d at 82. The Third Circuit explained:
Congress sought to limit the application of the antitrust laws to enable U.S.-flag carriers to compete against their foreign counterparts who may not be subject to similar restrictions. See H.R. Rep. No. 98-53(I), at 9, 10
A-3850-18T3 16 [(1983), as reprinted in 1984 U.S.C.C.A.N. 167, 174-75] (noting "[t]he perception . . . that the threat of U.S. antitrust prosecution weighs much more heavily on U.S. operators than their foreign-flag competition" and recognizing a "need to foster a regulatory environment in which U.S.-flag liner operators are not placed at a competitive disadvantage vis-a-vis their foreign-flag competitors"); S. Rep. No. 98-3, at 7 [(1983)] . . . (noting trading partners' "blocking statutes" and stating that "[c]lear antitrust immunity . . . marks a major step in revitalizing our maritime industry because it removes a major handicap created by uneven enforcement"); see also S. Rep. No. 98-3, at 1 . . . (recommending the bill "in order to . . . harmonize U.S. shipping practices with those of our major trading partners, especially by reaffirming antitrust immunity for certain carrier and conference activities"). To allow state antitrust claims to proceed would interfere with this goal.
[Id. at 85.]
Congress was particularly concerned about the "creation of parallel
jurisdiction over persons or matters which are subject to the Shipping Act," and
stated that "the remedies and sanctions provided in the Shipping Act . . . will be the
exclusive remedies and sanctions for violations of the Act." H.R. Rep No. 98-
53(I), at 12, 1984 U.S.C.C.A.N. at 177. The legislative history reveals ample
evidence of the goals cited by the Third Circuit. As pertinent here, "[p]rivate
suits for damages under the antitrust laws w[ould] no longer be permitted when the
injury [wa]s the result of conduct prohibited by the Shipping Act," H.R. Conf. Rep.
A-3850-18T3 17 No. 98-600, at 40 (1984), as reprinted in 1984 U.S.C.C.A.N. 283, 296, leaving the
"remedies and sanctions provided in the [statute as] the exclusive remedies and
sanctions for [its] violation," H.R. Rep. No. 98-53(I), at 12, 1984 U.S.C.C.A.N. at
177. To protect private parties, enhanced remedies would be available before
the FMC. Conf. Rep. on S. 47, Shipping Act of 1984, 130 Cong. Rec. 4644,
4645 (1984) (statement of Rep. Rodino).
Yet, notably, while the definition of "antitrust laws," from which the
statute conferred immunity, was designed to be "comprehensive in scope,"
H.R. Rep. No. 98-53(I), at 28, 1984 U.S.C.C.A.N. at 193, it includes only
federal enactments, 46 U.S.C. § 40102(2). Moreover, mentions in the
legislative history of concepts such as providing for "exclusive remedies"
before the FMC or avoiding confusing "parallel jurisdiction" are invariably
explained with reference to federal courts or antitrust laws. See, e.g., H.R.
Rep. No. 98-53(I), at 12, 1984 U.S.C.C.A.N. at 177 (citing problematic federal
court decisions and pointing to federal antitrust laws); see also Conf. Rep. on
S. 47, 130 Cong. Rec. at 4649 (statement of Rep. Fish) (mentioning FMC's
"virtual exclusive role" in enforcement in connection with antitrust laws); id.
at 4652 (statement of Rep. Hughes) (mentioning "exclusive authority" of FMC
A-3850-18T3 18 in connection with antitrust laws). Thus, the legislative history does not
plainly support the argument of either party.
The international nature of the Shipping Act, however, lends support to
preemption because international relations generally fall within the scope of the
federal government rather than the states. The Shipping Act was intended in large
part to prevent United States shippers from being hampered competitively in
relation to other international shippers by myriad regulations and types of litigation
in different fora. While defendants are foreign shippers, it would be unreasonable
to allow state litigation only when the defendants were not U.S.-flag shippers.
Although case law from the circuit courts is not binding, it may be used
persuasively. As did the trial court, we find the Third Circuit's reasoning
persuasive.
The Third Circuit found the Shipping Act was intended to protect the United
States shipping industry's competitive position. Federal criminal prosecution
coupled with the FMC proceedings exacted a significant financial consequence for
defendants' illegal activity and a deterrent to repeat the behavior. Plaintiff is
precluded from relief in state court.
A-3850-18T3 19 V. Other State Claims.
Plaintiff's other state claims, sounding in tort and contract law, are based on
the same behavior as its state antitrust claims, reframed as other causes of action.
The Third Circuit found the consumer protection and unjust enrichment claims
were also preempted because allowing "them here would allow the States to
impose rules in an area Congress has historically regulated: maritime commerce."
Vehicle Carrier, 846 F.3d at 85 (citing United States v. Locke, 529 U.S. 89, 108
(2000)). We agree with the Third Circuit's reasoning as applied to the tort claims
at issue here.
The Shipping Act states that "the exclusive remedy for a breach of a service
contract is an action in an appropriate court." 46 U.S.C. § 40502(f). The FMC and
other courts have interpreted this clause to mean that claims that relate to issues
peculiar to the Shipping Act should not be decided in court, but rather before the
FMC. See, e.g., In re Containership Co. (TCC) A/S, 466 B.R. 219, 227 (Bankr.
S.D.N.Y. 2012) (stating that when deciding between "a mere contract dispute and
an alleged violation that is 'particular'" to the Act, "courts have deferred to the
FMC to address issues that are specifically and expressly addressed in the Shipping
Act, such as whether an entity should be considered a 'common carrier' or whether
certain shipping practices are illegal and discriminatory and in violation of the
A-3850-18T3 20 Act"); CargoOne, Inc. v. COSCO Container Lines, Co., F.M.C. No. 99-24, at 14
(Oct. 21, 2000) (noting that "the more appropriate test is whether a complainant's
allegations are inherently a breach of contract claim, or whether they also involve
elements peculiar to the Shipping Act"). Congress has "put in place a regulator
familiar with complex foreign commerce issues confronting ocean common
carriers," allowing the FMC to use its special expertise "to make informed
decisions about whether conduct violates the Act and warrants punishment."
Vehicle Carrier, 846 F.3d at 86. Claims involving issues that are not particular to
the Shipping Act and do not require FMC expertise fall outside the jurisdiction of
the FMC. See, e.g., LSB Indus., Inc. v. Prudential Lines, Inc, 736 F.2d 10, 12 (2d
Cir. 1984) (finding that the issue of "what constitutes a 'full' barge" was outside the
FMC's exclusive jurisdiction because it "did not involve reasonableness of rates,
interpretation of technical terms, or other matters calling for FMC expertise").
Claims for breach of contract, which the Third Circuit did not address,
are distinct in character from both tort and antitrust claims in that the duties
they entail are voluntarily undertaken rather than imposed by law. Kossick v.
United Fruit Co., 365 U.S. 731, 741 (1961). Moreover, contract enforcement
ordinarily falls "within the traditional scope of the state's police powers."
Chae v. SLM Corp., 593 F.3d 936, 944 (9th Cir. 2010).
A-3850-18T3 21 Yet the contracts at issue here specifically deal with international
maritime commerce, a field traditionally regulated by the federal government,
eliminating any presumption against preemption. Vehicle Carrier, 846 F.3d at
84-85. More importantly, although breaches of contract may sometimes
escape the preemption applied to other state claims, see, e.g., Am. Airlines,
Inc. v. Wolens, 513 U.S. 219, 222 (1995), they do not do so pursuant to a
special standard all their own. They simply survive the same standard the
others fail—as pertinent here, whether the "state law 'stands as an obstacle to
the accomplishment and execution of the full purposes and objectives of
Congress'" so as to present an "actual[] conflict[]" with federal law. English v.
Gen. Elec. Co., 496 U.S. 72, 79 (1990) (quoting Hines v. Davidowitz, 312 U.S.
52, 67 (1941)).
For purposes of comparison, Section 301(a) of the Labor Management
Relations Act (LMRA), which broadly authorizes lawsuits for violation of a
collective bargaining agreement (CBA) to be brought in federal court, 29
U.S.C. § 185(a), preempts both contract and tort claims under state law so long
as their resolution "substantially depend[s]" on interpretation of a CBA. Berda
v. CBS Inc., 881 F.2d 20, 22-24 (3d Cir. 1989) (quoting Allis–Chalmers Corp.
v. Lueck, 471 U.S. 202, 220 (1985)). The rationale for preemption was that
A-3850-18T3 22 the uniformity offered by a federal common law governing CBA interpretation
would give a measure of certainty to parties to the collective bargaining
process, promoting agreement and, consequently, "industrial peace." Id. at 22-
23 (citing Teamsters v. Lucas Flour Co., 369 U.S. 95, 103-04 (1962)).
The Employee Retirement Income Security Act of 1974 (ERISA)
similarly preempts both state contract and tort actions arising from the
improper processing of a claim pursuant to an insured employee benefit plan
governed by that legislation. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 43,
57 (1987). The Supreme Court's conclusion in that regard largely turned on
interpretation of a set of statutory provisions addressing preemption, id. at 44-
45, 57, but was also informed by a congressional intent, evident from the
language and structure of the law and its legislative history, that the civil
enforcement scheme set forth in the statute was to provide an exclusive
remedy for violation, id. at 52-54, 57. The Court elaborated that this scheme
represent[ed] a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA.
A-3850-18T3 23 [Id. at 54.]
In contrast, the Supreme Court determined in American Airlines, that
while the Airline Deregulation Act of 1978 (ADA), 49 U.S.C. § 41713,
otherwise "bar[red] state-imposed regulation of air carriers" with regard to
rates, routes, or services, preempting the plaintiffs' consumer fraud claims, the
statute nonetheless "allow[ed] room for court enforcement of contract terms set
by the parties themselves" through the airline's frequent flier program. 513
U.S. at 222. Again, the Court's conclusion turned in part on the specific
language of the exemption provision. Id. at 228-29. But the Court further
noted that the ADA had been intended to promote reliance on market forces,
and that market efficiency, in turn, "require[d] effective means to enforce
private agreements." Id. at 230.
Moreover, other federal statutory provisions and regulations governing
the industry "presuppose[d] the vitality of contracts governing transportation
by air carriers," and nothing in the ADA suggested either the creation of a
"new administrative process for . . . adjudication of [such] private contract
disputes," or any intent to "channel into federal courts the business of
resolving, pursuant to judicially fashioned federal common law, the range of
contract claims relating to airline rates, routes, or services." Id. at 230-32.
A-3850-18T3 24 Notably, the Court explicitly contrasted the ADA with ERISA in the last
respect. Id. at 232.
The Shipping Act is more similar to ERISA and the LMRA than to the
ADA. Like ERISA and in contrast to the ADA, the Shipping Act does reflect
an intent to provide an exclusive remedy for violations of the Act and, indeed,
creates an administrative enforcement mechanism for that purpose in the form
of a proceeding before the FMC. Vehicle Carrier, 846 F.3d at 86-87. The
statute's legislative history, moreover, suggests that this exclusive enforcement
mechanism serves to ensure uniformity of interpretation, similarly to the
LMRA. Id. at 85-86. While nothing in the text of the Shipping Act or its
legislative history explicitly contemplates preemption of anything other than
federal antitrust claims, plaintiff offers no relevant distinction between the
effect on uniform federal regulation of maritime commerce that would arise
from enforcement of a state contract or tort claim on the one hand and
enforcement of a state antitrust claim on the other. If one is preempted, all
must be.
A review of the complaint confirms that every allegation of breach,
whether of an express or implied provision, stems from anticompetitive
behavior: a "conspiracy" among defendants to "overcharge" plaintiff for
A-3850-18T3 25 services. Regulation of international maritime commerce is peculiarly federal.
The Shipping Act preempts all of plaintiff's state claims.
Affirmed.
A-3850-18T3 26