Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

TUREK v. GENERAL MILLS (October 17, 2011)

Carolyn Turek brought suit against General Mills and Kellogg, alleging that the defendants' marketing of chewy bars violated the Illinois Consumer Fraud and Deceptive Business Practices Act. Specifically, she alleged that the defendants label the product as containing dietary fiber without disclosing that the principal fiber used in the product is processed and does not provide the normal benefits associated with fiber consumption. Judge Gettleman (N.D. Ill.) dismissed the suit for want of jurisdiction on the grounds that the action was preempted by federal law. Turek appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams affirmed (but on different grounds). First of all, the Court noted that the case was not one of complete preemption, where federal law pervades a field such that no state law claim could exist. The statute at issue here, the Nutrition Labeling and Education Act of 1990, provides specifically that it preempts no state law unless it is expressly preempted by the Federal Food, Drug, and Cosmetic Act. Therefore, the Court stated, the district court had jurisdiction to hear the case on the merits. The FFDCA does prohibit states from imposing labeling requirements that are not identical to the federal requirements. Federal law does impose a labeling requirements on dietary fiber. The principal requirement is that a manufacturer state the amount of fiber in each serving. The chewy bars at issue meet all the federal labeling requirements. The labeling that plaintiff suggests is missing is not identical to the federal labeling requirements and thus barred by federal law. Plaintiff's claim should have been dismissed for failure to state a claim, rather than for want of jurisdiction.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

PURCELL v. BANK OF AMERICA (October 3, 2011)

Kristine Purcell brought suit in state court against Bank of America under the Fair Credit Reporting Act and state law. She alleged that the bank reported to credit agencies that she was delinquent in her loan payments, when it knew she was not. The Bank removed the case to federal court and sought judgment as a matter of law on the FCRA claim. It argued that the Act did not provide a private damages claim for their alleged conduct. It also moved to dismiss the state claims with prejudice on preemption grounds. Judge Moody (N.D. Ind.) agreed with the Bank and dismissed the FCRA claim but concluded that the state law claims were not preempted. He dismissed them without prejudice. The Bank appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Sykes reversed and remanded. Section 1681t(a) of the Act provides that state law claims are not preempted except as provided in subsection (b). Subsection (b) states that no requirement or prohibition relating to furnishing information to credit agencies may be imposed "under the laws of any State." The district court concluded that "laws" means only statutes, not common law. The Court disagreed. As long ago as 1938, in Erie R. R. v. Tompkins, the Supreme Court held that the word "laws" in the Rules of Decision Act included all sources of law, including the common law. The Court also found support in the Dictionary Act and in Congressional drafting manuals. The Court rejected the district court's reliance on a perceived inconsistency within the Act if "laws" included all common law. In the Court's view, the subject sections were compatible and did not support the district court's conclusion. Therefore, the “laws” reference in FCRA includes the common law and the state law claims are preempted.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

KOLBE & KOLBE HEALTH & WELFARE BENEFIT PLAN v. THE MEDICAL COLLEGE OF WISCONSIN, INC. (September 2, 2011)

Scott Gurzynski worked for the Kolbe & Kolbe Millwork Co. and participated in its welfare benefit plan. His daughter K.G. was born in 2007. Although he submitted an enrollment change to the Plan in mid-2007, it was incomplete. For example, he neglected to indicate whether K.G. lived with him and whether he claimed her as a tax exemption. It was not until late November that he admitted that she did not live with him and that he was not claiming her as an exemption. The Plan requested additional information without success. It eventually denied enrollment status to K.G. in June 2008. Meanwhile, K.G. had received over $1.5 million in medical care from the Medical College of Wisconsin and the Children's Hospital of Wisconsin, all paid for by the Plan. After its decision denying K.G. enrollment status, the Plan asked the Medical College and the Children's Hospital to refund the money the Plan had paid. They refused. In a second amended complaint, the Plan seeks recovery under three theories: a) ERISA § 502(a)(3) equitable relief, b) unjust enrichment under federal common law, and c) breach of contract. Judge Crabb (W.D. Wis.) dismissed each of the claims and awarded attorneys fees to the defendants. The Plan appeals.

In their opinion, Seventh Circuit Judges Flaum and Williams and District Chief Judge Herndon affirmed in part and reversed and remanded in part. The Court addressed each theory in turn. ERISA § 502(a)(3) allows a Plan fiduciary to bring an equitable claim to enforce a term of the Plan. Here, the Plan seeks to enforce the Plan's overpayment provision. Under that provision, the Plan is entitled to seek recovery of payments it has made in error. However, the Plan limits that right to recovery from a "Covered Person." Although that term is not defined in the Plan, it is clear that neither the defendants, who provided the medical services, nor K.G., who was denied enrollment in the Plan, is a "Covered Person." The ERISA count was properly dismissed. In fact, in addressing the unjust enrichment count, the Court noted that ERISA had nothing to do with the case. K.G. was never covered by the Plan -- there is no need to interpret ERISA or the Plan. Therefore, there is also no ERISA unjust enrichment claim. The Court turned to the state law breach of contract claims. First, it concluded that the claims were not preempted by ERISA since the claims do not relate to the terms of the Plan. Instead, they relate to the contracts between the Plan and the defendants. The Court therefore remanded the state law claims to the district court, with the comment that the normal practice would be to decline to exercise supplemental jurisdiction over the claims. With respect to attorney's fees, the Court stated that the basic question, after the prevailing party's showing of some degree of success on the merits, is whether the losing party's position was substantially justified or merely harassment. The district court had concluded that the ERISA and state law claims were not substantially justified. The Court concluded that that was an abuse of discretion. It found all of plaintiffs claims to be substantially justified and taken in good faith – and reversed the fee award.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

UNION PACIFIC RAILROAD CO. v. CHICAGO TRANSIT AUTHORITY (July 25, 2011)

The Union Pacific Railroad Company owns a 2.8 mile right-of-way running between Chicago and Oak Park, Illinois. UP itself operates three railroad tracks on the right-of-way. Since the early 1960s, UP has leased approximately 40% of the right-of-way to the Chicago Transit Authority. The CTA runs two railroad tracks parallel to UP’s. A written lease has defined the rights and obligations of UP and CTA over the years. For example, CTA must maintain its tracks in good condition, is limited to providing passenger transportation, and must reimburse UP 40% of any joint maintenance expenses. UP, on the other hand, maintains the right-of-way and all joint facilities and has agreed to use non-standard inspection and maintenance procedures because of the proximity of the lines to each other. The CTA pays monthly rent to UP, recalculated every 10 years under a formula contained in the lease. The monthly rent increased from approximately $25,000 to approximately $90,000 when it was recalculated for the 2002-2012 lease period. The parties discussed a one-time permanent easement fee instead of a monthly rent but did not reach an agreement. In 2006, CTA issued an ultimatum. It offered approximately $7.5 million for a perpetual easement or, if that was not acceptable, it would condemn the property. UP declined and, making good on its threat, the CTA instituted condemnation proceedings. UP brought suit for an injunction, maintaining that the Interstate Commerce Commission Termination Act preempted the condemnation. Judge Dow (N.D. Ill.) granted summary judgment to UP, concluding that the condemnation was both categorically preempted and preempted "as applied." The CTA appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Evans affirmed. The Court addressed the underlying legal principles. Under the Supremacy Clause, federal law preempts state law that interferes with it. Congress enacted the Interstate Commerce Commission Termination Act in 1995, which gave the Surface Transportation Board exclusive jurisdiction over railroad transportation regulation. "Transportation" includes a railroad's property, facilities, and equipment that are related to the movement of passengers or property. The Court found it clear that UP and the right-of-way were covered by the statute. In addressing whether the condemnation was preempted by the statute, the Court discussed the Board's two approaches to preemption. Some state action is preempted on its face, notwithstanding its rationale. That is referred to as categorical preemption. Other state action may be preempted depending on the degree of interference with railroad operations, which is referred to as "as applied" preemption. The district court adopted the Board's approaches and found the condemnation preempted under both approaches. The Court, on the other hand, concluded that the categorical preemption approach should be used only when looking at a rule of general applicability. A condemnation is not such a rule. By definition, it relates to a specific parcel of property and each instance has a different factual setting. The Court found support for its conclusion in the Board's cases. Applying the "as applied" analysis, the Court agreed with the district court. The CTA argued that is already using the right-of-way and its condemnation is defined as being coextensive with the lease. Therefore, it argues, the condemnation can not be considered an interference at all. In fact, it is nothing more than maintaining the status quo. The Court found the CTA's logic flawed. First, the CTA’s use of the property significantly interferes with UP transportation. The fact that UP agreed to that interference, in return for significant monthly rent, does not change the nature of interference. Preemption only comes into play when the interference is forced by regulation, not when it is agreed to by contract. Second, the Court disagreed with the CTA’s assertion that the condemnation is coextensive with the lease. For example, the lease has a termination clause. If the CTA stops using the tracks for passenger transportation or otherwise fails to live up to its obligations under the lease, the lease terminates. There would be no such provision after a condemnation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

HO v. TAFLOVE (June 6, 2011)

In 1998, Professor Seng-Tiong Ho was an engineering professor at Northwestern University. It was then that he first formulated his "4-level 2-electron atomic model.” He was working with graduate student Chang at the time. Several years later, Chang started working for Professor Allen Taflove, another engineering professor at the University. Graduate student Huang began working with Ho and his Model. Some Model research results were mentioned in a 2001 paper and later included in Huang's master’s thesis. In 2003 and 2004, Taflove and Chang wrote a paper and an article describing the Model and its applications. Ho and Huang brought an action against Taflove and Chang alleging violations of the Copyright Act. They also included in their complaint allegations of conversion, fraud, and misappropriation of trade secrets. Judge Bucklo (N.D. Ill.) granted summary judgment to the defendants on all counts. Ho and Huang appeal.

In their opinion, Circuit Judges Ripple and Hamilton and District Judge Murphy affirmed. The Court first addressed the copyright infringement claim. At issue in the case is the Copyright Act exception for ideas. The Court found that the Model was an idea. The whole purpose of the Model was to replicate reality. The plaintiffs did not create something, they merely discovered something. The Court conceded that a description of a scientific idea may be protected under copyright principles, but noted the plaintiffs failed to adequately support that argument. The Court turned to the state law claims and first considered preemption. The Copyright Act preempts state claims if the work at issue is in a tangible form and if the right at issue is "equivalent" to a § 106 right. The 106 rights are "reproduction, adaptation, publication, performance, and display." Preemption applies even if the material is not protected by copyright. The Court found the tangible form element satisfied and addressed the § 106 element with respect to each cause of action. It found the conversion count preempted because it was based on the alleged publication, a § 106 right. It found the fraud count preempted as well. Although fraud claims are frequently not preempted because they contain elements different from infringement, the fraud alleged here is that the works were published without attribution. Publication is a § 106 right. The Court found the trade secret misappropriation claim not preempted because the claim contained elements of secrecy and confidentiality that are not contained in the Copyright Act. The plaintiffs could not prevail on that claim, however, because they did not maintain the secrecy of the Model. Plaintiffs intentionally released the information in the conference paper and Huang’s thesis. They can no longer succeed on a trade secret claim.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

BAUSCH v. STRYKER CORP. (December 23, 2010)

Several days after the FDA advised the Stryker Corp. that its Trident hip replacement system’s manufacturing process was deficient, Margaret Bausch received a new hip -- a Trident. Bausch's Trident failed, she required additional surgery, and she experienced a number of medical problems. Bausch brought a negligence and strict liability suit under state law, alleging that the device violated federal law. Judge Der-Yeghiayan (N.D. Ill) granted the defendants' motion to dismiss on the grounds that the claims were preempted by federal law. The court also entered final judgment without allowing Bausch an opportunity to amend. Bausch appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Hamilton reversed and remanded. The Court first considered express preemption. Class III medical devices such as the Trident system are granted an express, but limited, preemption defense from product liability claims by the Medical Device Amendments of 1976. Citing the Supreme Court's decisions in Lohr and Riegel, the Court stated that the preemption protection applies to devices that comply with federal law and does not preclude claims based on a violation of federal law. Although expressly not deciding whether Bausch would be able to prove the allegations of her complaint that the device violates federal law, the Court concluded that the express preemption defense should not preclude her from trying. The Court also rejected the defendants' implied preemption defense under Buckman. Buckman involved an allegation of fraud on the FDA -- the Supreme Court expressly distinguished that type of claim from a traditional state court claim. Having concluded that the claims alleged were not preempted, the Court next addressed whether they were adequately stated under Iqbal and Twombly. The Court concluded that both the original complaint and the proffered amended complaint met that standard. With respect to the original complaint, although it did not specify the specific federal violation, it did provide enough information to put defendants on notice of the nature of the claim. This is particularly true in the situation here, because the victim of a defective product frequently does not know the exact nature of the defect and much information regarding Class III medical devices is kept confidential by law. The Court also concluded that the proffered amended complaint was sufficient and should not have been rejected. It provided additional factual detail as well as a clarification that Bausch was proceeding under a federal violation theory. The Court found no merit in any of the district court's rationales for denying leave to amend and cautioned district courts to allow a party an opportunity to amend after dismissal for failure to state a claim, even if the court is skeptical of the party's ability to successfully do so. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

FLYING J, INC. V. VAN HOLLEN (September 3, 2010)

A Wisconsin statute requires a minimum markup on gasoline sold in the state. The statute itself provides the formula with which to calculate the markup. The statute also authorizes a state agency to sue violators, issue cease and desist orders, and seek injunctions. It also provides for a private cause of action. Despite receiving over 1500 complaints of violations between 2003 and 2008, the agency did not prosecute one case. Flying J, a Wisconsin gasoline retailer, brought suit to enjoin the state from enforcing the minimum markup provisions. It alleged that the statute was preempted by the Sherman Act. Judge Randa (E.D. Wis.) agreed and issued a permanent injunction. When the state defendants elected not to appeal, the Wisconsin Petroleum Marketers and Convenience Store Association moved to intervene. The Court, in an earlier opinion (intheiropinion), reversed the District Court's denial of the intervention motion and accepted the Association as the appellant.

In their opinion, Judges Posner, Ripple, and Kanne reversed, dissolved the injunction, and remanded. In order to be preempted by the Sherman Act, a statute must mandate or authorize illegal conduct or place "irresistible pressure" to violate the law. Flying J's argument that the statute allows gasoline retailers to collude on prices is not enough -- the statute does not on its face mandate or authorize that conduct. Furthermore, there was no evidence in the record of actual collusion. The Court thought the outcome controlled by the Supreme Court's decision in Fisher. Flying J also argued that the statute was preempted as a "hybrid" statute (in which a government enforces prices set at the discretion of private parties). The Court concluded that the statute is not a hybrid statute. In hybrid statute cases, private parties -- not the state -- set the prices. Here, the state sets the minimum price. The fact that the statute includes a private cause of action and a “meet competition” exception does not make it a hybrid.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

SPOERLE v. KRAFT FOODS GLOBAL (August 2, 2010)

Kraft Foods operates an Oscar Mayer plant in Madison, Wisconsin. It requires its employees to wear boots, hardhats, smocks, and hairnets for safety and cleanliness. Obviously, it takes a short time each day to put on and take off this equipment. The Fair Labor Standards Act provides that an employer must pay an employee for the time spent "donning and doffing." However, the Act allows for the non-payment of that time if a collective bargaining agreement so provides. The Collective Bargaining Agreement between Kraft and its union does so provide and Kraft does not compensate its employees for the activity. Several employees brought suit against Kraft. They alleged that Wisconsin's state law also requires "donning and doffing" payment and does not have a collective bargaining agreement exception. Judge Crabb (W.D. Wis.) agreed and entered judgment in plaintiffs' favor. Kraft appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Evans affirmed. The Court first focused on the plain language of § 203(o) of the Act, which is the definition of “Hours Worked” and contains the collective bargaining agreement exception. Section 203(o) specifically limits its application to §§ 206 and 207 of the Act -- the federal provisions relating to minimum wage and overtime. The Court turned its attention to § 218(a) of the Act, which specifically allows a state to specify a higher minimum wage or a shorter maximum workweek than that provided in the Act. Since Wisconsin could establish a higher minimum hourly wage, the Court reasoned that it would be "senseless" to preclude it from dictating what work hours should be compensated. The Court therefore concluded that the Act did not prevent a state from requiring the donning and doffing payment. Finally, the Court also concluded that federal labor law did not preempt the Wisconsin law since it does not interfere with the collective bargaining process – it simply sets forth a requirement that an employer must meet.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

MASON v. SMITHKLINE BEECHAM (February 23, 2010)

Two days after twenty-three year old Tricia Mason began taking an antidepressant drug manufactured by defendant, she committed suicide. Mason's parents sued the manufacturer, alleging that it was negligent for not warning of an increased suicide risk. The district court granted summary judgment to the defendant, holding that the claims were preempted by federal law. The Masons appeal.

In their opinion, Circuit Judges Evans and Sykes and District Judge Simon reversed and remanded. The Court noted that conflict preemption was the type of preemption at issue in the case. The Supreme Court addressed conflict preemption in Levine, which was decided a year after the district court granted summary judgment. In Levine, the Supreme Court rejected the argument that state law failure-to-warn claims were generally preempted as a result of the FDA's drug labeling responsibilities. The Supreme Court stated that preemption could exist if a drug manufacturer presented "clear evidence" that the FDA would have rejected the proposed warning in the label but held that preemption did not exist in Levine. Since the Supreme Court did not clarify what it meant by "clear evidence," the Court simply compared the administrative history of the defendant's drug with the drug at issue in Levine. After that comparison, the Court concluded that the defendant had not met the burden established by Levine.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

SHARP ELECTRONICS CORP. v. METROPOLITAN LIFE INSURANCE CO. (August 18, 2009)

Sandra Rudzinski was an active employee of Sharp Electronics when she began experiencing fatigue and headaches. As a Sharp employee, she participated in its disability plan. Under the plan, Sharp paid short-term benefits during an initial 180-day period and Metropolitan Life Insurance Company ("MetLife") paid long-term benefits. Sharp paid premiums to MetLife on behalf of its employees. Rudzinski received short-term benefits from Sharp and applied for long-term benefits from MetLife. MetLife denied her application, first on the ground that she had a pre-existing disability and later on the ground that she had not completed the 180 days of short-term benefits. Rudzinski sued MetLife under ERISA. During the litigation, MetLife told Rudzinski that MetLife also denied her benefits because Sharp stopped remitting premium payments after her employment ended. She added Sharp as a defendant. She accused Sharp of interfering with her benefits, violating fiduciary duties, and for telling her that she could maintain her benefits by obtaining a conversion policy. Sharp cross-claimed against MetLife, alleging breach of fiduciary duty, equitable estoppel and indemnity. Rudzinski voluntarily dismissed her claim against Sharp and the court entered judgment in her favor in her claim against MetLife, leaving only Sharp's cross-claim. Sharp filed an amended complaint, alleging breach of fiduciary duty under ERISA, indemnification, negligence, negligent inducement, negligent misrepresentation, abuse of process and common-law breach of fiduciary duty. The court granted MetLife's motion to dismiss, concluding that MetLife had not breached a fiduciary duty and that the state law claims were preempted by ERISA. Sharp appeals.

In their opinion, Judges Kanne, Rovner and Wood affirmed with respect to ERISA and vacated and dismissed with respect to the state law claims. In order to recover under its ERISA claim, Sharp had to prove that MetLife owed it a fiduciary duty, that it was involved in fiduciary functions when it told Rudzinski about Sharp's failure to pay premiums, and that it was seeking damages for losses suffered by the plan (as opposed to the company). Although the Court agreed that Sharp and MetLife both occupied fiduciary roles, it concluded that MetLife did not owe a fiduciary duty to Sharp. It also concluded that Sharp's only losses were its fees and expenses in defending the suit brought by Rudzinski, losses not recoverable under ERISA. With respect to the state law claims, the Court disagreed with the district court that they were preempted by ERISA. ERISA does not preempt state law claims that are not related to a benefit plan. Here, Sharp's claims relate to its contractual relationship with MetLife. Even though the subject of that relationship is a benefit plan, claims relating to the contract are not preempted. The Court nevertheless dismissed the state law claims based on the lower court's alternative ruling that it would not exercise its discretion to hear the state law claims, considering that the only federal claim was dismissed. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

CITY OF JOLIET, ILLINOIS v. NEW WEST, L.P. (April 9, 2009)

The City of Joliet filed eminent domain proceedings to acquire the Evergreen Terrace Apartments. New West, the owner of the apartment complex, filed an action under 42 U.S.C. § 1983. New West sought an injunction and damages, alleging that federal law preempted Joliet's attempts to condemn the property. The district court originally put the condemnation on hold and dismissed the § 1983 action. On the first appeal, the Court reversed and directed the district court to resolve the condemnation proceedings. On remand, HUD intervened and contended that the condemnation was precluded by two different federal statutes. The district court rejected HUD’s argument and certified the case for interlocutory appeal. New West and HUD appeal.

In their opinion, Chief Judge Easterbrook and Judges Williams and Sykes affirmed. The court reviewed the three federal statutes in play. Section 8 of the Housing Act of 1937 provides federal rent subsidies. Section 221 of the National Housing Act creates a federal government mortgage insurance program. Finally, the Multifamily Assisted Housing Reform and Affordability Act of 1997 provides a mechanism for HUD to renegotiate mortgages under section 221. Owners who renegotiate under the 1997 Act must promise to maintain availability for low income tenants for 30 years. Evergreen Terrace participated in all three programs. The Court held in the first appeal that Section 8 does not preempt any eminent domain proceeding. HUD argues that a condemnation would interfere with the purposes of Section 221 and the 1997 Act, both of which are designed to preserve low income housing stock. The Court noted that the Supreme Court recently warned against using preemption inferred from a clash of goals and objectives. Only if an agency has issued a preemptive regulation with the force of law should that power be used expansively. The Court noted that no such HUD regulation exists with respect to eminent domain powers. In fact, the Court did not even agree that the clash of goals even existed. All three federal statutes are voluntary. Even when used, private owners can withdraw from the programs at any time. Without such a regulation, the Court concluded that the eminent domain should go forward.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

SMART v. LOCAL 702 INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS (April 7, 2009)

Ronald Smart’s non-union electrical company was awarded a contract to perform electrical work at a sports complex. He claims that Local 702 threatened the owner of the sports complex and coerced him to replace Smart’s company with union electricians. Smart brought an action against the local under the Illinois Antitrust Act. He also brought state law unwarranted prosecution and malpractice claims against the union’s lawyers (claims arising from earlier legal actions against Smart by the union). The district court dismissed the antitrust claim, concluding that it was preempted by the National Labor Relations Act. It also dismissed the state law claims, holding that the malpractice claim could not be brought against a lawyer who had never represented Smart and that the unwarranted prosecution claim required that he prevailed in the underlying litigation (he did not). Smart appeals

In their opinion, Judges Ripple, Kanne and Tinder affirmed in part, reversed in part and remanded. The Court first addressed its jurisdiction. The Court observed that there was an apparent lack of diversity and lack of a federal question in the complaint. Although the union raised a federal preemption defense, federal preemption does not normally provide a basis for asserting jurisdiction. One exception to that rule is the "complete preemption" doctrine. When an area is completely preempted by federal law and Congress substitutes a federal cause of action, a claim purportedly based on state law is considered a federal claim. Here, the Court first concluded that Smart's state antitrust claim was preempted by federal law. Next, it noted that Congress provided a cause of action in 29 U.S.C. § 187 with respect to injuries resulting from a secondary boycott. The Court found "ample evidence" that Congress intended to convert state common-law antitrust complaints into federal claims. The Court therefore concluded that § 187 completely preempted Smart’s state law antitrust claim and provided an exclusive federal remedy. The Court remanded that part of the case to the district court for further proceedings. The Court agreed with the lower court's analysis of the state law unwarranted prosecution and malpractice claims.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 NORFOLK SOUTHERN v. BOX (February 11, 2009)

The State of Illinois requires railroads to install walkways alongside railroad tracks in any switching yard built or renovated after February 2003. Norfolk Southern challenged the requirement in the district court, contending that it is preempted by federal law. The district court found for Illinois, first holding that federal law does not cover the subject matter and then, after a bench trial, deciding that the regulation does not conflict with a federal objective. Norfolk Southern appeals. 

In their opinion, Chief Judge Easterbrook and Judges Bauer and Sykes affirmed. The Court first noted a split in both state and federal courts over whether state walkway rules are compatible with federal law. Courts have upheld rules in California, Colorado, and Maryland. Texas and Indiana rules have been struck down as preempted by federal law. The Court3 looked to the federal law. Federal law requires that regulations relating to railway safety be as nationally uniform as practicable – but it allows a state safety regulation to remain in effect until a federal regulation covers the subject matter of the state regulation. There are no federal regulations dealing with railway walkways in particular. Norfolk Southern contends that the comprehensive federal regulation of roadbed design and construction "covers" walkways because they are so integrally related. The Court, noting that the Supreme Court has adopted a more narrow reading of "cover" than Norfolk Southern, rejected that notion. In fact, the Court referred to a still-standing 1977 federal decision to leave walkway regulation to the states. The Court moved on to the question whether the Illinois scheme conflicts with federal objectives. Illinois grants broad discretion over the design and construction of the walkways. Norfolk Southern presented expert testimony that the only viable walkway construction material was gravel but that even gravel would cause drainage problems. The district court discounted the latter conclusion for two reasons. First, photographs in the record of Norfolk Southern switching yards showed that the shallower slope between tracks that the expert said would cause drainage problems already existed. Yet, the expert could not describe the drainage problems or show evidence of yards that had the V-shaped slope he testified was necessary to prevent drainage problems. Second, in response to the court’s questions, the expert was unable to testify regarding the history of compliance with walkway regulations in other states that have had the requirement for years. If compliance with the regulation led to all sorts of drainage or other problems, the records in those states surely would show that. The Court did not find the district court’s finding clearly erroneous on that issue. Finally, the Court refused to address Norfolk Southern’s complaints that specific local situations might make compliance impossible, advising the railroad to work details out with the Commission.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

520 SOUTH MICHIGAN AVENUE ASSOC. v. SHANNON (December 15, 2008)

520 South Michigan Avenue Assoc. does business as The Congress Plaza Hotel & Convention Center (“Congress Hotel”) in Chicago, Illinois. It employs approximately 130 room attendants (the employees who clean guest rooms). Unite Here Local 1 union (“Unite Here”) represents these employees. Congress Hotel and Unite Here had a collective bargaining agreement (“CBA”) that expired in 2002. Congress Hotel has agreed to abide by the expired CBA while the parties negotiate a new one. During the negotiations, the Illinois legislature passed the Hotel Room Attendant Amendment (the “Attendant Amendment”) to the One Day Rest in Seven Act. In relevant part, the Attendant Amendment: a) mandates two 15-minute break periods and a 30-minute meal period each day, b) provides a penalty of three times an employee’s wages for a daily violation, c) creates a rebuttable presumption that any adverse employer action after an employee’s exercise of rights under the section constitutes retaliation, and d) provides for an award of attorney’s fees and costs to a prevailing party in an enforcement action. The Attendant Amendment applies only to employees in Cook County, Illinois. Congress Hotel filed suit for a permanent injunction prohibiting enforcement of the Attendant Amendment. It argued that the Attendant Amendment was preempted by the National Labor Relations Act (“NLRA”). The district court granted the motions of the Illinois Department of Labor and Unite Here to dismiss the case. Congress Hotel appeals.

In their opinion, Judges Manion, Kanne and Tinder reversed and remanded. The Court noted that preemption can be either express or implied. Since the NLRA contains no express preemption provision, the question is whether the state statute conflicts with federal law or frustrates a federal scheme, or whether Congress intended to occupy the field. The Court identified two different NLRA preemption doctrines from Supreme Court cases. The Court stated that Congress, in approaching collective bargaining and unions, took a multi-pronged approach. It prohibited some conduct; it protected some conduct; and it specifically left some conduct to the forces of the free market. Garmon preemption seeks to prevent conflict between local regulation and the NLRA’s scheme of regulation. In contrast, Machinists preemption seeks to prevent local regulation of conduct that Congress intended not to be regulated. The Court first addressed Machinists preemption. Three propositions have been established by the Supreme Court in its post-Machinists cases of Metropolitan Life and Fort Halifax: a) the NLRA is more concerned with an equitable bargaining process than its substantive terms, b) the NLRA does not preempt a state law that regulates a mandatory subject of bargaining, and c) the NLRA does not preempt a state law that establishes a minimum labor standard that does not intrude upon the bargaining process. The Court went on to address the defendants’ argument that the Attendant Amendment is simply a minimum labor standard. The Court decided that it is not because: a) it is not a statute of general application (it applied to only one job in one industry in one county), b) it did not provide a low-threshold (i.e., minimum) standard but rather established a term of employment that would be hard to bargain for, and c) it included provisions creating a cause of action, shifting the burden of proof and creating a presumption of retaliation that interfered with and overrode the dispute resolution mechanisms already in place. Since the Court thus found the statute preempted by the Machinists doctrine, it did not reach the Garmon doctrine or consider the Congress Hotel’s equal protection or due process arguments.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

ILLINOIS BELL TELEPHONE CO. v. BOX  (November 26, 2008)

Illinois Bell Telephone Co. (“Illinois Bell”) is a provider of local telephone service. The Illinois Commerce Commission (“ICC”) ordered Illinois Bell to provide certain elements of service, including access to switching centers and splitting, to competing carriers at its cost. Illinois Bell brought suit against the Commission to be relieved of that obligation. The district court granted summary judgment to Illinois Bell. The ICC and intervenor Globalcom, Inc. appeal.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court first noted the federal interest and approach to the telecommunication industry. Congress and the FCC have established certain requirements to promote competition in the industry. Section 251 of the Telecommunications Act of 1996 (“Act”) requires carriers like Illinois Bell to provide certain services to other carriers on an unbundled basis and at cost. The FCC determines which services are included, after considering whether access is necessary and whether denial of access would impair the requesting carrier’s ability to provide its service. If the FCC decides a service meets the section 251 criteria, a carrier can request the service from carriers like Illinois Bell at its cost. Section 271 of the Act also entitles carriers to gain access to other unbundled services from “Bell Operating Companies” such as Illinois Bell. Unlike section 251, however, section 271 does not require that access be provided at cost. The FCC allows a carrier to charge a market rate for section 271 services.

The Court found that the ICC’s order that Illinois Bell provide services at cost was inconsistent with Sections 251 and 271. The Court noted that the ICC was, in effect, overruling the FCC. The Court pointed out that the savings clause of section 251 allowed state orders that were consistent with and did not prevent implementation of the section. The Court concluded that the ICC’s orders were inconsistent with and did substantially prevent the implementation of the federal policy. The Act does not specifically forbid the requirement imposed by the ICC but to allow it would defeat the goals of the FCC. The Court concluded that only network services identified by the FCC under section 251 are required to be provided at cost. Other services, even if required to be provided, can be charged at a market price. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link