June 14, 2019- Donald L. Schmidt v. Tavenner’s Towing & Recovery, LLC, No. A-1-CA-35863

OCR transcription for search; preserved printed pages are authoritative

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: June 14, 2019

No. A-1-CA-35863

DONALD L. SCHMIDT, Individually,
MARY LEE SCHMIDT, Individually,
LAURA TWEED, and PEGASUS
PLANES LLC, as Power of Attorney
for DONALD L. SCHMIDT and MARY
LEE SCHMIDT,

Plaintiffs-Appellants,

Vv.

TAVENNER’S TOWING &
RECOVERY, LLC, and FRED
GARNER,

Defendants-Appellees.

Court of Appeals of New Mexico
Filed 6/14/2019 8:35 AM

Hue
Mark Reynolds

APPEAL FROM THE DISTRICT COURT OF TORRANCE COUNTY

Kevin R. Sweazea, District Judge

Michael Danoff & Associates, P.C.
Michael L. Danoff

Ryan P. Danoff

Albuquerque, NM

for Appellants

Lewis Brisbois Bisgaard & Smith LLP
Ryan T. Saylor
Albuquerque, NM

for Appellees

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OPINION

MEDINA, Judge.

{}} Plaintiffs, Donald and Mary Schmidt, owners of a Glastar aircraft (the
airplane), sued Defendant, Tavenner’s Towing & Recovery, LLC (Tavenner’s), on
claims for negligence, breach of implied contract, and breach of the implied
covenant of good faith and fair dealing, after the airplane caught fire and was
completely destroyed while being towed by Tavenner’s.' The district court granted
Tavenner’s Rule 1-012(B)(6) NMRA motion to dismiss, arguing that the Federal
Aviation Administration Authorization Act (FAAAA), 49 U.S.C. § 14501(c)(1)
(2012), preempted Plaintiffs’ claims. We reverse and remand.

BACKGROUND

23 The facts alleged in the amended complaint are as follows. In late 2014,
Plaintiffs’ airplane crashed in Torrance County, New Mexico. The Torrance County
Sheriff's Department contacted Tavenner’s to pick up the airplane. Tavenner’s took
possession of the airplane, loaded it onto a tow truck, and was in the process of
towing the airplane when it caught fire and was completely destroyed. All claims

were based on allegations that Tavenner’s failed to properly load, care for, and

'Plaintiffs also sued Fred Garner for declaratory relief. Garner is not a party
to this appeal.

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transport the airplane and that this caused the airplane’s destruction. The complaint
alleges no other conduct resulting in the damages claimed.

3} Tavenner’s filed a motion to dismiss under Rule 1-012(B)(6), arguing that
“Plaintiffs’ allegations concern the transportation of personal property from a crash
site in Moriarty, New Mexico, to Tavenner’s Towing & Recovery in Moriarty, NM”
and that the FAAAA expressly preempts Plaintiffs’ claims. After briefing and a
hearing on the matter, the district court entered a memorandum of decision stating
that it had reviewed the cases cited by the parties and concluded that Plaintiffs’
claims against Tavenner’s should be dismissed on the basis of preemption. This
appeal followed.

STANDARD OF REVIEW

{4} “A district court’s decision to dismiss a case for failure to state a claim under
Rule 1-012(B)(6) is reviewed de novo.” N.M. Pub. Schs. Ins. Auth. v. Arthur J.
Gallagher & Co., 2008-NMSC-067, ¥ 11, 145 N.M. 316, 198 P.3d 342 (internal
quotation marks and citation omitted). Preemption is a question of law reviewed de
novo. See Humphries v. Pay & Save, Inc.,2011-NMCA-035, J 6, 150 N.M. 444, 261
P.3d 592.

45} A motion to dismiss under Rule 1-012(B)(6) “merely tests the legal
sufficiency of the complaint[,]” by inquiring whether the complaint alleges facts

sufficient to establish the elements of the claims asserted. Envtl. Improvement Div.

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of N.M. Health & Env’t Dep't v. Aguayo, 1983-NMSC-027, J 10, 99 N.M. 497, 660
P.2d 587; see C & H Constr. & Paving, Inc. v. Found. Reserve Ins. Co., 1973-
NMSC-076, 4 9, 85 N.M. 374, 512 P.2d 947. Under this inquiry, “the well-pleaded
material allegations of the complaint are taken as admitted; but conclusions of law
or unwarranted deductions of fact are not admitted.” C & H. Constr. & Paving, Inc.,
1973-NMSC-076, ¥ 9 (internal quotation marks and citation omitted). “A complaint
may be dismissed on motion if clearly without any merit; and this want of merit may
consist in an absence of law to support a claim of the sort made, or of facts sufficient
to make a good claim[.]” Jd. (alteration, internal quotation marks, and citation
omitted).

{6} | Courts addressing motions to dismiss based on the argument that claims are
expressly preempted by federal law ask whether the complaint’s allegations show
that the preemption provision at issue encompasses a plaintiffs’ claims. See Travel
All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428-31 (7th
Cir. 1996) (stating, on appeal from an order treating a motion to dismiss common-
law claims based on express preemption by the Airline Deregulation Act of 1978
(ADA) as a Fed. R. Civ. P. 12(b)(6) motion and granting that motion, that the court
“must determine if the plaintiffs can prove any set of facts that would entitle them
to relief’ and that this required the court “to interpret whether the ADA’s express

preemption provision encompasses the plaintiffs’ common law claims” while

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“accepting all the well-pleaded allegations in the complaint as true”); cf Dan’s City
Used Cars, Inc. v. Pelkey, 569 U.S. 251, 260 (2013) (stating, in addressing FAAAA
preemption argument raised on summary judgment, that “our task is to identify the
domain expressly pre[]empted” (internal quotation marks and citation omitted));
Boyz Sanitation Serv., Inc. v. City of Rawlins, 889 F.3d 1189, 1198 (10th Cir. 2018)
(analyzing FAAA preemption argument raised on summary judgment by inquiring
whether state and local regulations concerning garbage collection fall within the
FAAAA’s “preemptive scope” and, if so, whether the impact “is too insignificant to
warrant preemption”).

PREEMPTION

{7} The preemption doctrine is rooted in the Supremacy Clause of the United
States Constitution, which provides that “the Laws of the United States . . . shall be
the supreme Law of the Land[.]” U.S. Const. art. VI. “Congress has the power to
preempt state law.” Choate v. Champion Home Builders Co., 222 F.3d 788, 791
(10th Cir. 2000); see Oneok, Inc. v. Learjet, Inc., 135 §. Ct. 1591 (2015) (explaining
that, as a consequence of the Supremacy Clause, Congress may “pre[Jempt, i.e.,
invalidate, a state law through federal legislation”). “In the interest of avoiding
unintended encroachment on the authority of the [s]tates, however, a court
interpreting a federal statute pertaining to a subject traditionally governed by state

law will be reluctant to find pre[Jemption. Thus, pre[Jemption will not lie unless it

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is the clear and manifest purpose of Congress.” CSX Transp, Inc. v. Easterwood, 507
U.S. 658, 663-64 (1993) (internal quotation marks and citation omitted); see
Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516-17 (1992) (stating that
“(clonsideration of issues arising under the Supremacy Clause starts with the
assumption that the historic police powers of the [s]tates are not to be superseded by
Federal Act unless that is the clear and manifest purpose of Congress” and that
“Congress’ enactment of a provision defining the preemptive reach of a statute
implies that matters beyond that reach are not preempted” (alterations, omission,
internal quotation marks, and citation omitted)); see also Palmer v. St. Joseph
Healthcare P.S.O., Inc., 2003-NMCA-118, Ff 38-39, 134 N.M. 405, 77 P.3d 560
(stating the general preemption principles applied by appellate courts in New
Mexico, including the “strong presumption against preemption” (internal quotation
marks and citation omitted)).

{833} Tavenner’s argues that the FAAAA expressly preempts Plaintiffs’ state
common-law claims. Accordingly, “we must use ordinary principles of statutory
interpretation to evaluate whether the state law falls within the scope of the federal
provision precluding state action[,]” and “focus on the plain wording of the clause,
which necessarily contains the best evidence of Congress’ pre[]emptive intent.”
Boyz Sanitation Serv., Inc., 889 F.3d at 1198 (internal quotation marks and citation

omitted); see Dan’s City, 569 U.S. at 260 (stating that courts attempting to “identify

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the domain expressly pre[Jempted” must “focus first on the statutory language,

which necessarily contains the best evidence of Congress’ pre[Jemptive intent”
(internal quotation marks and citations omitted)). “[T]he defendant bears the burden
of showing Congress’ intent to preempt.” Self v. United Parcel Serv., Inc., 1998-
NMSC-046, 4 7, 126 N.M. 396, 970 P.2d 582.

DISCUSSION

A. The FAAAA

{93 The preemption provision at issue here evolved from a statute concerning
deregulation of the domestic airline industry, summarized by the United States

Supreme Court as follows:

The [ADA], 92 Stat. 1705, largely deregulated the domestic airline
industry. In keeping with the statute’s aim to achieve “maximum
reliance on competitive market forces,” Congress sought to “ensure that
the [s]tates would not undo federal deregulation with regulation of their
own.” Congress therefore included a preemption provision, now
codified at 49 U.S.C. § 41713(b)(1), prohibiting [s]tates from enacting
or enforcing any law “related to a price, route, or service of an air
carrier.”

Two years later, the Motor Carrier Act of 1980, 94 Stat. 793, extended
deregulation to the trucking industry. Congress completed the
deregulation 14 years therefore, in 1994, by expressly preempting state
trucking regulation. Congress did so upon finding that state governance
of intrastate transportation of property had become “unreasonably
burdensome” to “free trade, interstate commerce, and American
consumers.” Borrowing from the ADA’s preemption clause, but adding
a new qualification, § 601(c) of the FAAAA supersedes state laws
“related to a price, route, or service of any motor carrier with respect to
transportation of property.”

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Dan’s City, 569 U.S. at 255-56 (omission and citations omitted).

4103 Section 14501 of the FAAAA, entitled “Federal authority over intrastate

transportation,” provides in relevant part:
[A s]tate . . . may not enact or enforce a law, regulation, or other

provision having the force and effect of law related to a price, route, or
service of any motor carrier . . . with respect to the transportation of

property.
49 U.S.C. § 14501(c)(1). This case involves the interaction between the FAAAA’s
preemption provision and Plaintiffs’ common-law claims.
113 “{S]tate common-law rules fall comfortably within the language of the
[FAAAA] pre[Jemption provision.” Nw., Inc. v. Ginsberg, 572 U.S. 273, 281 (2014).
“[T]he current version of this provision applies to state ‘laws, regulations, or other
provisions having the force and effect of law[.]’ ” /d. at 281-82 (alterations omitted).
The United States Supreme Court has explained that “[i]t is routine to call common-
law rules ‘provisions[,]’ ” id. at 282, and further:

Exempting common-law claims would . . . disserve the central purpose

of the [FAAAA]. The [FAAAA] eliminated federal regulation of rates,

routes, and services in order to allow those aspects of [motor]

transportation to be set by market forces, and the pre[]Jemption

provision was included to prevent the [s]tates from undoing what the
[FAAAA] was meant to accomplish.

Id. at 283. “What is important, therefore, is the effect of a state law, regulation, or
provision, not its form, and the [FAAAA’s] deregulatory aim can be undermined

just as surely by a state common-law rule as it can by a state statute or regulation.”

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Id. The questions, then, are whether the FAAAA applies and whether Plaintiffs’
common-law claims have the prohibited effect.
{12} Under the FAAAA, “motor carrier” means “a person providing motor vehicle
transportation for compensation.” 49 U.S.C. § 13102(14) (2012). “Transportation”
under the FAAAA includes “a motor vehicle . . . or equipment of any kind related
to the movement of passengers and property . . . and services related to that
movement, including arranging for, receipt, delivery, elevation, . . . handling, .. .
and interchange of. . . property.” 49 U.S.C. § 13102(23). The FAAAA’s preemption
provision contains the following exemption for state regulation of the price charged
for nonconsensual tows:
does not apply to the authority of a [s]tate . . . to enact or enforce a law,
regulation, or other provision relating to the price of for-hire motor
vehicle transportation by tow truck, if such transportation is performed

without the prior consent or authorization of the owner or operator of
the motor vehicle.

49 U.S.C. § 14501(c)(2)(C) (2012) (emphasis added). This exemption “plainly
indicates that tow trucks qualify as ‘motor carriers of property[.]’ ” City of Columbus

v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 430 (2002) (alteration, internal

The complaint contains no allegations concerning compensation. As noted,
Tavenner’s bears the burden to prove that Plaintiffs claims fall within the scope of
the FAAAA’s preemption provision. Self, 1998-NMSC-046, § 7. While lack of
compensation would undermine Tavenner’s preemption argument, Plaintiffs do not
make this argument and so we analyze the preemption question as if this definitional
requirement is met.

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quotation marks, and citation omitted); see Stucky v. City of San Antonio, 260 F.3d
424, 431 (Sth Cir. 2001), abrogated on other grounds by Ours Garage & Wrecker
Serv., 536 U.S. 424 (“The purpose of th{e FAAAA preemption] provision was to
eliminate overlapping state and municipal regulations, which increased costs,
decreased efficiency and reduced competition and innovation in the towing services
industry.” (emphasis added)). The explicit limitation to laws “relating to the price of
for-hire motor vehicle transportation by tow truck,” however, renders the exemption
inapplicable to the claims asserted in this case, which involve allegations of damages
arising from the towing of an airplane (not a motor vehicle) and do not involve a
dispute about “price.” Cf Ours Garage & Wrecker Serv., 536 U.S. at 429-30
(explaining that “nonconsensual tows” are tows of “illegally parked or abandoned
vehicles”).

{13} Federal courts interpreting the FAAAA’s preemption language often refer to
decisions interpreting the nearly identical preemption provision in the ADA. See
ADA, 49 U.S.C. § 41713(b)(1) (2012) (stating that “a [s]tate ... may not enact or
enforce a law, regulation, or other provision having the force and effect of law
related to a price, route, or service of an air carrier”); Dan’s City, 569 U.S. at 260
(stating that its reading of the FAAA’s preemption clause was informed by decisions
interpreting the parallel language in the ADA’s preemption clause”); see also

Bedoya v. Am. Eagle Express, Inc., 914 F.3d 812, 818 (3d Cir. 2019) (observing that,

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because of the parallels between the ADA and FAAAA, ADA cases are instructive
regarding the scope of FAAAA preemption).

4143 The United States Supreme Court has interpreted the phrase “related to” to
“embrace[] state laws having a connection with or reference to carrier rates, routes,
or services, whether directly or indirectly.” Dan’s City, 569 U.S. at 260 (internal
quotation marks and citation omitted). Significantly, however, the Court also has
cautioned that the FAAAA does not preempt “state laws affecting carrier prices,
routes, and services in only a tenuous, remote, or peripheral manner.” Jd. at 261
(omission, internal quotation marks, and citation omitted); see also Boyz Sanitation,
889 F.3d 1189 at 1198-1200 (concluding that, even if state and local regulations
concerning garbage collection fell within the FAAAA’s preemptive scope, the
impact “is too insignificant to warrant preemption”). Courts have interpreted
Supreme Court precedent as prohibiting the development of “broad rules concerning
whether certain types of common-law claims are preempted[,]” and as requiring that
courts instead “examine the underlying facts of each case to determine whether the
particular claims at issue ‘relate to” [motor carrier] rates, routes or services.” Travel
All Over the World, 73 F.3d at 1433 (citing Morales v. Trans World Airlines, Inc.,

504 U.S. 374 (1992)).

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B. Negligence

{15}. The amended complaint asserts a negligence claim based on allegations that
Tavenner’s failed to load and transport the airplane properly, did not do “all it could
to preserve the [a]irplane[,]” and “did not follow industry standards for towing,
transporting and protecting the airplane. Tavenner’s contends that the FAAAA
preempts common-law negligence claims because they seek to impose state-based
standards of care on motor carriers. We disagree.

{16} First, the purpose of the FAAAA’s preemption clause is to prohibit states from
effectively re-regulating the motor carrier industry and to promote “maximum
reliance on competitive market forces[.]” 49 U.S.C. § 40101(a)(6) (2012); see Rowe
v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 372 (2008) (stating that the state law in
question “produces the very effect that the federal law sought to avoid, namely, a
[s]tate’s direct substitution of its own governmental commands for ‘competitive

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market forces’ ”). Plaintiffs’ negligence claim is directed specifically at the manner
in which Tavenner’s carried out the service of loading and transporting Plaintiffs’
property. Although Plaintiffs’ negligence claim relates to the transportation of
property, the claim does not target or affect the regulation of motor carriers in
general. In such instances, courts have declined to find preemption under the

FAAAA, concluding that the relation or effect on a motor carrier’s rates, routes, or

services to be too tenuous to be preempted. See Rowe, 552 U.S. at 370-71 (stating

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that state laws forbidding gambling would be too tenuous, remote, or peripheral to
be preempted); Bedoya, 914 F.3d at 821 (“Laws that are directed at members of the
general public and that are not targeted at motor carriers are usually viewed as not
having a direct effect on motor carriers.” (internal quotation marks and citation
omitted)); Lupian v. Joseph Cory Holdings LLC, 905 F.3d 127, 134-35 (3rd Cir.
2018) (finding no preemption of class action suit against motor carrier alleging
violation of state wage payment and collection act, because the act did not
significantly impact or frustrate the FAAAA’s deregulatory objectives); Hodges v.
Delta Airlines, Inc., 44 F.3d 334, 340 (Sth Cir. 1995) (en banc) (holding that a
negligence cause of action was not preempted when it made no specific reference to
services and would not significantly affect services); Nyswaner v. C.H. Robinson
Wordwide Inc., 353 F. Supp. 3d 892, 896 (D. Ariz. 2019) (holding that a negligent
hiring claim was not preempted by the FAAAA because “[nJegligent hiring claims
are generally applicable state common law causes of action that apply to a wide
variety of industries”). We similarly find the relationship between Plaintiffs’
negligence action to a motor carrier’s prices, routes, and services too tenuous to be
preempted by the FAAA. See Dan’s City, 569 U.S. at 261 (cautioning that “state
laws affecting carrier prices, routes, and services in only a tenuous, remote, or
peripheral manner” are not preempted by the FAAAA (omission, internal quotation

marks, and citation omitted)); Boyz Sanitation, 889 F.3d 1189 at 1198-1200

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(concluding that, even if state and local regulations concerning garbage collection

fell within the FAAAA’s preemptive scope, the impact “is too insignificant to
warrant preemption”).
4173 Second, because the FAAAA does not provide for alternative sources of

damage recovery, Plaintiffs would be left without judicial remedy should their
claims be preempted. “It is difficult to believe that Congress would, without
comment, remove all means of judicial recourse for those injured by illegal
conduct.” Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 251 (1984). In light of the
Supreme Court’s caution “that federal courts should not displace police powers by
federal law unless that was the clear and manifest purpose of Congress[,]” federal
courts have reasoned that the absence of any alternative judicial remedy or recourse
is evidence that common-law actions to recover for personal injury or property
damage are not preempted. Hodges, 44 F.3d at 338 (analyzing preemption by the
ADA); Nyswaner, 353 F. Supp. 3d at 896 (analyzing preemption by the FAAAA and
stating “[h]ere it seems . . . unlikely that Congress meant to exempt transportation
brokers from tortious conduct they would otherwise be liable for at common law”);
Gill v. JetBlue Airways Corp., 836 F. Supp. 2d 33, 42 (D. Mass. 2011) (applying the
same analysis to preemption by the ADA). In Dan’s City, the Supreme Court stated
that the result of leaving damaged parties without any judicial recourse to recover

damages “can[not] be attributed to a rational Congress.” 569 U.S. at 265.

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18} In addition, the FAAAA’s inclusion of a provision requiring motor carriers to
carry liability insurance “sufficient to pay .. . for each final judgment . . . for bodily
injury to, or death of, an individual resulting from the negligent operation,
maintenance, or use of motor vehicles, or for loss of or damage to property[,]” 49
U.S.C. § 13906(a)(1) (2012) (emphasis added),? is strong evidence Congress did not
intend to preempt claims for damages resulting from motor carrier negligence. See
Taj Mahal Travel, Inc. v. Delta Airlines, Inc., 164 F.3d 186, 194 (3d Cir. 1998) (“It
would make little sense to require insurance to pay for bodily injury claims if [motor
carriers] were insulated from such suits by the preemption provision.”); Hodges, 44
F.3d at 338 (“A complete preemption of state law in [the areas of state tort actions]
would have rendered any requirement of insurance coverage nugatory.”); Harris v.
Velichkov, 860 F. Supp. 2d 970, 980-81 (D. Neb. 2012) (“The purpose of requiring
such proof of financial responsibility is to ensure that the public is adequately
protected from the risks created by a motor carrier’s operations.”); Creagan v. Wal-
Mart Transp., LLC, 354 F. Supp. 3d. 808, 814 (N.D. Ohio 2018) (holding that
personal injury claim brought against brokers of motor transport is preempted

because the liability insurance requirement only applies to motor carriers

3The ADA similarly mandates liability insurance coverage “sufficient to pay
... for bodily injury to, or death of, an individual or for loss of, or damage to,
property to others[.]” 49 U.S.C. § 41112(a) (2012).

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themselves, and stating that the insurance requirement “affirmatively establish[es]
that a motor carrier may be liable for these types of negligence actions”).

{19} Weconclude that the FAAA does not preempt Plaintiffs’ negligence claim.
C. Breach of Implied Contract

{20} Plaintiffs’ amended complaint asserts a claim for “breach of implied
contract,” without any allegations establishing the existence of a contract affording
Plaintiffs a right to recover from Tavenner’s for its breach. The only allegation even
suggesting the existence of a contract is this: “As a direct result of [Tavenner]’s
breach and failure to protect and transport the [a]irplane as agreed upon, Plaintiffs
have been damaged and are entitled to compensatory damages in an amount to be
proved at trial.” There is no allegation establishing the existence of a contract
between Tavenner’s and Plaintiffs. To the contrary, the complaint elsewhere alleges
that Tavenner’s “agreed to take the [a]irplane in its possession after being contacted
by the Torrance County Sheriff's Department.” Thus, to the extent the complaint
may be deemed to allege the existence of any agreement, that agreement was
between Tavenner’s and Sheriff, and there is no allegation establishing a legal basis
entitling Plaintiffs to recover against Tavenner’s for breach of that agreement. The
question whether the complaint sufficiently alleges a contract claim affording
Plaintiffs a right to recover against Tavenner’s for its breach was not argued or ruled

on by the district court and is not before us. See Rule 12-321(A) NMRA (“To

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preserve an issue for review, it must appear that a ruling or decision by the trial court
was fairly invoked.”); Batchelor v. Charley, 1965-NMSC-001, J 6, 74 N.M. 717,
398 P.2d 49 (declining to review issue where the appellant failed to meet the burden
“to show that the question presented for review was ruled upon by the trial court”).
Given the presumption against preemption and that Tavenner’s bears the burden to
prove preemption, we conclude that the allegations are insufficient to permit analysis
of the question that is before us—whether the FAAAA expressly preempts the claim.
See Self, 1998-NMSC-046, ¥ 7. Accordingly, we reverse and remand without
reaching the question and leave the issue for the district court to decide in the first
instance.

D. Breach of the Covenant of Good Faith and Fair Dealing

21} Plaintiffs’ claim for breach of the covenant of good faith and fair dealing
presents a similar problem. If there is no contract, there can be no covenant and
therefore no breach of the covenant. See Sanchez v. The New Mexican, 1987-NMSC-
059, 7 13, 106 N.M. 76, 738 P.2d 1321 (stating that no good faith and fair dealing
claim may be brought when there is no contract “upon which the law can impose the
stated duty to exercise good faith and fair dealing”). The allegations in the amended
complaint are insufficient to permit analysis of the question whether the FAAAA

preempts the claim for breach of the covenant of good faith and fair dealing, and we

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reverse and remand without reaching the question, again leaving the question for the
district court to decide.

CONCLUSION

722} We reverse the district court’s dismissal of Plaintiffs’ claims and remand for
proceedings consistent with this opinion.

23} ITISSO ORDERED.

QUELINE R. MEDINA, Judge

WE CONCUR:

4,

MICHAEL D. BUSTAMANTE, Judge Pro Tempore

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