S.C. Johnson & Son, Inc. v. Transport Corp. of America
2012 U.S. App. LEXIS 19835
| 7th Cir. | 2012Background
- S.C. Johnson, a manufacturer, sued in federal court after an internal bribery scheme involving its former Transportation Department director Morris and various carriers came to light.
- Morris allegedly took hundreds of thousands in bribes and gifts to steer contracts and favorable treatment to donor-carriers; Johnson terminated him in 2004 and he was criminally prosecuted.
- Johnson previously prevailed in a Wisconsin Racine County state case against eight defendants, obtaining a judgment for over $200 million; the present case involves different Carriers.
- The federal complaint, filed August 10, 2010, alleges the Carriers conspired with Morris to pay bribes in exchange for business and above-market transportation charges.
- Johnson asserts five state-law theories: fraudulent misrepresentation by omission, conspiracy to bribe, conspiracy to commit fraud, WOCCA racketeering, and aiding and abetting breach of fiduciary duty.
- The district court dismissed under FAAAA preemption, ruling that claims relating to prices, routes, or services were preempted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAAAA preempts Johnson’s state-law claims | Johnson argues bribery/racketeering laws avoid preemption | Carriers argue all claims relate to rates/services and are preempted | -Partially preempted: two claims preempted, bribery/racketeering not preempted (at least initial stage) |
| Are fraud-by-omission and conspiracy-to-commit-fraud preempted | Johnson seeks damages tied to fraudulent conduct | These claims regulate prices or services | Fraud-by-omission and conspiracy-to-commit-fraud preempted |
| Do Wisconsin bribery and WOCCA racketeering claims fall outside preemption | Bribery/anti-corruption laws not central to rates | These are general statutes affecting conduct in the industry | Not preempted; bribery and racketeering claims survive |
| Is aiding-and-abetting breach of fiduciary duty time-barred | Aiding-and-abetting pleaded | Time-barred under governing limitations | Aiding-and-abetting theory not reached; time-bar issue reserved for later |
Key Cases Cited
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (U.S. 1992) (ADA preempts state actions connected with rates/routes/services)
- American Airlines, Inc. v. Wolens, 513 U.S. 219 (U.S. 1995) (ADA preemption; private ordering vs. state protection?)
- Rowe v. New Hampshire Motor Transp. Ass’n, 552 U.S. 364 (U.S. 2008) (FAAAA preemption; deregulation framework)
- United Airlines, Inc. v. Mesa Airlines, Inc., 219 F.3d 605 (7th Cir. 2000) (preemption requires law to relate to rates/routes/services)
- Travel All Over the World, Inc. v. Saudi Arabia, 73 F.3d 1423 (7th Cir. 1996) (two preemption requirements: relate to rates/routes/services or enforce law)
- Data Manufacturing, Inc. v. United Parcel Service, Inc., 557 F.3d 849 (8th Cir. 2009) (contract claim allowed; others preempted)
- Onoh v. Northwest Airlines, Inc., 613 F.3d 596 (5th Cir. 2010) (preemption of IIED/breach where international regulation applies)
- In re Korean Air Lines Co., Ltd. Antitrust Litigation, 642 F.3d 685 (9th Cir. 2011) (state antitrust claims barred by preemption for indirect purchasers)
- Hodges v. Delta Airlines, Inc., 44 F.3d 334 (5th Cir. 1995) (non-preemption of certain state tort claims)
- Travel All Over the World, Inc. v. Saudi Arabia, 73 F.3d 1423 (7th Cir. 1996) (illustrative preemption analysis)
- ATA Airlines, Inc. v. Federal Express Corp., 665 F.3d 882 (7th Cir. 2011) (promissory estoppel not preempted)