Federal statute of limitations does not preempt state statute in collections action

January 3, 2017

The United States Congress’ purpose in passing the Interstate Commerce Commission Termination Act was not to preempt state statutes of limitations, the Indiana Supreme Court held Tuesday, so an 18-month federal statute of limitations cannot bar a transportation company’s collections claim against an Indiana manufacturer.

When Kennedy Tank & Manufacturing Company needed a “massive” process tower vessel transported from its headquarters in Indianapolis to Hemlock Semiconductor’s location in Clarksville, Tennessee, Kennedy contracted with Emmert Industrial Corporation to transport the vessel for $197,650 plus additional unforeseen costs.

As Emmert attempted to transport the vessel, the I-64 bridge between Indiana and Kentucky unexpectedly closed, requiring additional route surveys and permit applications in Indiana, Illinois, Missouri and Tennessee. Construction delays, road closures, permit applications, safety escorts and bureaucratic delays led to additional unforeseen costs of $691,301.03. The vessel was successfully delivered  Nov. 11, 2011.

After delivery, Emmert began trying to collect the additional costs from Kennedy, and the dispute lasted through January 2013 and went to arbitration from June to August 2014. Kennedy refused to pay the additional charges in September 2014, claiming that it owed nothing because of a federal 18-month statute of limitations.

Emmert then sued alleging breach of contract or unjust enrichment, but Kennedy moved to dismiss, again relying on the 18-month federal statute of limitations. Emmert countered that the federal statute did not preempt Indiana’s 10-year limitations period and further argued that the settlement discussions equitably estopped Kennedy from asserting the federal statute.

The Marion Superior Court denied the motion to dismiss, but the Indiana Court of Appeals reversed that decision and found that Indiana’s statute was preempted. But a unanimous Indiana Supreme Court agreed with the trial court Tuesday, holding in Kennedy Tank & MFG. Co., Inc. and Hemlock Semiconductor Operations LLC and Hemlock Semiconductor, LLC v. Emmert Industrial Corporation d/b/a Emmert International, 49S02-1608-CT-431, that the federal statute did not preempt the state statute.

Chief Justice Loretta Rush pointed out that Congress “provided no indication that it intended to impose a uniform national statute of limitations, and breach of contract collection actions are not an area of federal regulation.”  Further, Rush wrote that according to the concept of conflict preemption, which applies in this case, a federal law can void a state law only when it is “physically impossible” to comply with both laws and when the state law does “major damage” to the purpose of the federal law.

The first leg of conflict preemption, physical impossibility, cannot apply to Kennedy’s case, Rush wrote, because Emmert could have filed suit within the 18-month federal limitations period, so it was not a physical impossible for the company to comply with both statutes of limitations.

Additionally, Indiana’s statute of limitations does not do “major damage” to Congress’ purpose because the Interstate Commerce Commission Termination Act shifts regulatory authority from the federal government to the states, not to assert federal authority over state-law collections.

The justices rejected Kennedy’s argument that Congress intended to create uniform national standard for interstate transportation because the language of the ICCTA does not expressly preempt state statutes of limitations.

Further, Rush, referencing the case of Fla. Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 133, 139 (1963), wrote that state collection actions are not likely to be candidates for federal regulation because there is no uniformity vital to national interests.

“Relevant here, Congress turned over contract collection actions to the operation of state law in the ICCTA – reflecting its ‘goal of reducing federal involvement in motor carriers’ private contracts,’” Rush wrote. “… In doing so, Congress demonstrated there is no need for exclusive federal regulation and decided to ‘tolerate whatever tension’ exists between state and federal law.’”


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