Addressing what he said was an unsettled question on pre-emption, a federal judge in New Jersey has rejected a move by a conglomeration of the world’s largest international container carriers—facing a price-fixing lawsuit by Mercedes-Benz USA—to have the lawsuit heard in federal court rather than state court.
U.S. District Judge Stanley Chesler on Wednesday rejected pre-emption claims and ordered that the lawsuit, filed by Mercedes against the group of defendants—Nippon Yusen Kabushiki Kaisha, K Line America, Matsui O.S.K., Wallenius Wilhelmsen Logistcs AS and Kawasaki Kaisha Ltd.—be moved back to Bergen County Superior Court, where it was originally filed.
According to the decision, Mercedes used the carriers in the import of its cars and light trucks. The carriers use “roll on, roll off” services, more commonly known as “RoRo” services, to ship Mercedes vehicles to various ports of entry into the United States.
The Mercedes lawsuit alleges that the defendants frequently met in secret to set shipping prices, divvy up ports of entry, and rig bids. The automaker claims that the defendants violated the New Jersey Antitrust Act, and it asserted common-law claims of tortious interference and violation of the doctrine of good faith and fair dealing.
The defendants removed the lawsuit to U.S. District Court, citing the complete pre-emption of federal law, specifically the federal Shipping Act of 1994, which governs and regulates international shipping. The companies said the Shipping Act has an “unusually powerful preemptive force.”
But Chesler noted that the Shipping Act provides for disputes to be resolved by the Federal Maritime Commission, not the federal trial courts, and cited the U.S. Supreme Court’s 2006 ruling in Beneficial Mutual Bank v. Anderson, which said federal pre-emption cannot be “so powerful as to displace entirely any state cause of action.”
Chesler posed the legal question as: “can complete preemption operate to remove a state law action where, as here, the federal statute in question has powerful preemptive force but requires that disputes be resolved in a forum other than a federal district court?”
“Defendants do not cite, and the Court’s own research has not uncovered any Supreme Court or Third Circuit authority addressing this nuance in a complete preemption analysis conducted according to the standard articulated in Beneficial National Bank,” Chesler wrote, pointing to a 2005 ruling from the U.S. Court of Appeals for the Second Circuit in Sullivan v. American Airlines. There, the court ruled that the federal Railway Labor Act didn’t pre-empt state law defamation claims by airline employees against airlines.
Chesler said he was “presented with a near-identical situation in this action, in which the Shipping Act is presumably the basis for the Court’s jurisdiction and yet would require that the Court dismiss the action because sole authority to handle the dispute is vested in the Commission.
“For the same reasons articulated by the Second Circuit in Sullivan, this Court finds that the standard for complete preemption has not been met in this case,” he wrote.
He added, “Powerful as it may be, the Shipping Act simply does not create an exclusive federal cause of action which the controversy set forth in the Complaint could ‘arise under’ and which could originally have been filed in federal court.”
Chesler also rejected the defendants’ diversity claim, saying all defendants have ready access to New Jersey’s courts.
Chesler did, however, reject Mercedes’ requests for attorney fees and costs in fighting the attempt to move the case to federal court.
Chesler said he had to consider whether the defendants’ attempted move was “objectively meritless.”
“In its discretion, the court declines to award attorney’s fees and costs,” he said. “Defendants’ removal was no objectively unreasonable. Removal was based on the strong federal interest in the dispute at issue.”
Mercedes’ lead attorney, John Fornaciari, of the Washington, D.C., office of Baker & Hostetler, was unavailable for comment.
Steven Kaiser, of the Washington office of Cleary Gottlieb Steen & Hamilton, one of the defendants’ lead attorneys, declined to comment.