In Nexus Alarm & Suppression, Inc. v. MG Logistics, Inc., Case No. 20-cv-6043 (N.D. Ill. May 27, 2021), Nexus – apparently the intended consignee and/or bailee of specialized fire extinguishers – filed suit against the carrier MG Logistics for damages that occurred to the extinguishers while in transit.
After rejecting the extinguishers, Nexus submitted a claim to MG Logistics and to Nexus’ insurer, Hartford. The claim was denied, and without providing Nexus advance notice, MG Logistics or Hartford sold the extinguishers for salvage, yielding $78,000.
Nexus filed a two count complaint against MG Logistics under the Carmack Amendment, and a regulation promulgated thereunder (49 C.F.R. § 370.11). The regulation sets forth a carrier’s responsibility to salvage goods that are rejected after suffering damage in transit.
Defendant MG Logistics moved the Court to dismiss Count II of the complaint which was based upon the regulation, arguing that the rule did not provide for a private cause of action.
Judge Seeger noted that only Congress can create a private cause of action to enforce statutory or regulatory provisions. “[R]aising up causes of action where a statute has not created them may be a proper function for common-law courts, but not for federal tribunals. . . . courts cannot create private rights of action based on their policy preferences. That’s the job of Congress.”
The Court explained that the same can be said for the Executive Branch, which “can’t create a private right of action.”
And while Congress did create a private right of action under the Carmack Amendment, that does not mean that regulations promulgated thereunder offer the same right to a plaintiff. “[T]he Supreme Court has rejected the idea that a right to sue under a statute means that Congress intended a right to sue under a regulation, too.” Thus the Court granted MG Logistics’ motion to dismiss Count II, leaving the Carmack Amendment claim intact.
While creative legal arguments that comport with FRCP 11 can some times, when accompanied by the “right” facts, yield a remedy for an otherwise out-of-luck plaintiff, they come with no guarantees. As a practical matter, it seemingly would have been prudent for MG Logistics and/or the insurer to contact the harmed party here (Nexus) in advance to confer about a salvage sale. Perhaps a greater recovery could have been realized. But the apparent lack of prior notice to Nexus isn’t enough to create a private right of action under the regulation. Only Congress has that power. Hopefully Nexus was more successful with its Carmack Amendment claim.