Contribution, Indemnification, And Breach Of Contract Claims Under State Law Not Preempted By LIA

After a railroad settled four cases brought under the Federal Employers’ Liability Act (FELA) with employees for injuries caused by allegedly defective equipment, the railroad filed an action against the company that manufactured the equipment and the company that had been hired to repair the equipment “in such a way as to prevent future seat failures” for state law indemnification, contribution, and breach of contract claims.  The U.S. District Court for the Western District of Pennsylvania, however, dismissed the case on the grounds that all of the railroad’s claims were preempted by the Locomotive Inspection Act (LIA), which occupies the entire field of regulating locomotive equipment.

Yesterday, the Third Circuit vacated the district court decision and determined that the LIA did not preempt the railroad’s claims.  Recognizing U.S. Supreme Court precedent precluding a state from imposing its own duties and standards of care on the manufacture and maintenance of locomotive equipment, the Third Circuit nonetheless explained that the LIA does not preempt a state claim based on the federal standard of care stemming from the LIA.  The court explained, “If we were to hold that state law claims asserting a violation of the LIA are preempted, railroads would be left with no remedy, no matter how obvious or egregious the liability of an equipment supplier.”  Notably, the railroad could not sue the equipment supplier directly under the LIA because the LIA lacks a private right of action and it cannot sue them under FELA because that statute provides a remedy only to railroad employees.

The court emphasized that the state breach of contract claims would survive even if it had decided that the LIA preempted the contribution and indemnification claims given that breach of contract claims involve voluntarily assumed duties as opposed to duties imposed by state law.  “There is a salutary ‘you’ve made your own bed, now lie in it’ quality to several cases from the Supreme Court that emphasize the importance of voluntarily assumed contractual obligations.”  Commenting on the manufacturer’s argument that the railroads’ economic power should preclude their ability to go after manufacturers for contribution after FELA settlements, the court concluded, “But even the rich and powerful are entitled to the rule of law, and we see no reason to believe that Congress meant for Darwinian attrition to replace legal remedies.”


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