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From Products Liability Law Daily, March 13, 2019

Common-law contribution claim based on federal law violation not preempted

By Leah S. Poniatowski, J.D.

A railroad seat manufacturer was liable for portion of a settlement paid by a railroad to employees injured from a seat collapse in violation of the federal Locomotive Inspection Act.

A railroad sued for violating federal statutes governing locomotive and employee safety could recover against the locomotive seat manufacturer in a state-law indemnity/contribution cause of action because the governing case law construed the federal statute as permitting common law claims, the state appellate court in Minnesota ruled, upholding the lower court’s decision in that respect. Although the railroad could recover prejudgment interest, the lower court nevertheless erred when it calculated interest from when the third-party action was filed because the "special damages" interest began to accrue when the railroad paid the settlement funds to the employees, the appellate court determined, affirming the lower court in part and reversing and remanding in part (Miller v. Soo Line Railroad Co., March 11, 2019, Bratvold, D.).

FELA claims. In 2013, three separate lawsuits were filed against Soo Line Railroad Company, d/b/a Canadian Pacific (Canadian Pacific), for violations of the federal Locomotive Inspection Act (LIA) and the Federal Employers Liability Act (FELA) for injuries sustained by employees who had been injured from collapsing locomotive seats. The employee lawsuits were consolidated, and Canadian Pacific settled with the employees, paying a total of almost $2.45 million in exchange for dismissal of the FELA claims.

Indemnification claim. Before settling the FELA claims, Canadian Pacific filed a third-party contribution/indemnity claim under state law against Knoedler Manufacturers. Inc. and Knoedler Manufacturers Canada LTD (collectively, Knoedler), alleging that the seats were made by Knoedler and that the company failed to design and manufacture seats in compliance with the LIA and governing regulations. Canadian Pacific contended that Knoedler should indemnify or make a contribution to the railroad if the latter was found liable to the employees. Knoedler filed for summary judgment, asserting that the contribution/indemnification claims were preempted by LIA.

The district court agreed with Canadian Pacific that the Minnesota Supreme Court decision holding state common-law actions are not preempted by LIA was still good law, despite that case recently having been revisited by the U.S. Supreme Court. The matter went to trial and the jury returned a verdict for Canadian Pacific, allocating fault equally between the railroad and Knoedler for the employee’s injuries. Thereafter, Canadian Pacific sought prejudgment interest pursuant to Minnesota law. The court granted Canadian Pacific’s motion, but clarified that the base sum was limited to what Knoedler had offered during the parties’ settlement talks—$810,000—and that interest should be computed from the date that Knoedler had been notified of the FELA settlements through its settlement offer. Canadian Pacific requested a motion to reconsider the start point for calculating the interest, arguing that interest should accrue from the point when the railroad filed its third-party claim against Knoedler. The court agreed with Canadian Pacific, after which Knoedler filed the present appeal.

Preemption. The state appellate court upheld the district court’s determination that state-law indemnity/contribution claims are not preempted by LIA. The appellate court acknowledged the recent Supreme Court ruling but distinguished it from the case at bar. Specifically, the panel observed that the High Court did not discuss or consider railroad employer common-law indemnity/contribution claims vis-a-vis FELA damages for employee injuries, nor did the case concern FELA or contribution/indemnity claims. Moreover, the High Court’s ruling did not hold that all state law-based claims for locomotive design issues are preempted by LIA, leaving that question unanswered. The appellate court explained that the preemption question had been answered by the Minnesota Supreme Court, which explicitly held that LIA does not preempt state-law based claims rooted in violations of that statute. Because the Minnesota high court’s ruling was on point and still is good law, the panel ruled that the lower court did not err when it determined that Canadian Pacific’s contribution claim was not preempted by federal law.

Prejudgment interest. The appellate court agreed that Canadian Pacific could recover prejudgment interest from Knoedler. Although prejudgment interest is not permitted under FELA, Canadian Pacific’s claims against Knoedler were based on common-law indemnity/contribution stemming from violations of LIA. The appellate court explained that character of the contribution claim was common law—not federal law—and because Canadian Pacific had been allotted contribution damages, it was entitled to prejudgment interest under Minnesota law.

However, the appellate court held that the lower court erred when it computed the prejudgment interest from the commencement from the consolidated action because the damages were "special damages," which accrue when the damages were incurred. In this case, the damages accrued when Canadian Pacific paid the settlements to the employees, ane not when it initiated the contribution action. Therefore, the damages granted by the lower court were reversed and the matter remanded to compute the interest accordingly.

The case is No. A18-0357.

Attorneys: Randall J. Pattee (Fox Rothschild LLP) for Soo Line Railroad Co. d/b/a Canadian Pacific. James T. Smith, Huffman (Usem, Crawford & Greenberg, P.A.) for Knoedler Manufacturers, Inc.

Companies: Soo Line Railroad Co. d/b/a Canadian Pacific; Knoedler Manufacturers, Inc.

MainStory: TopStory PreemptionNews DefensesLiabilityNews DamagesNews IndustrialCommercialEquipNews MinnesotaNews

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