A federal appeals court has decided to allow litigation in the District of Columbia court system to proceed before considering Worldwide Moving & Storage’s lawsuit over the D.C. government’s imposition of a surety bond requirement on a federally licensed motor carrier or its employees. Such a requirement is preempted by federal law, the company says.
“Because principles of equity, comity and federalism favor abstaining from addressing Worldwide’s federal claims while the D.C. court proceedings continue, we affirm the district court’s dismissal of Worldwide’s complaint,” the U.S. Court of Appeals for the District of Columbia said. The appeals court’s action, however, does not preclude consideration of the constitutional question at a later date, but the court did suggest that Worldwide’s preemption claim was not “facially conclusive.”
The case involves Worldwide founder Melvin Yates and proceedings surrounding a company that he previously operated, M.Y. Enterprises (MYE). In October 2001, Yates pleaded guilty in D.C. Superior Court to five misdemeanor counts of failing to comply with contract provisions in jobs performed by MYE.
The Superior Court eventually entered a preliminary injunction requiring Yates and MYE obtain a $100,000 surety bond in the name of the District of Columbia. But MYE couldn’t secure the bond and filed for Chapter 7 liquidation. The D.C. government then sought an order in Superior Court holding Yates in contempt for operating Worldwide without a surety bond. Yates eventually filed for personal bankruptcy protection, leaving Worldwide as the target.
Worldwide contended the Superior Court’s enforcement proceeding is preempted under the Carmack Amendment and under regulations that prohibit states from enforcing laws or regulations governing certain aspects of interstate transportation. The appeals court, however, said the Carmack Amendment governs only the private liability of a carrier to the owner of the property. And the statute on preemption specifically allows states to regulate carriers with regard to minimum amounts of financial responsibility relating to insurance and self-insurance.
